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tv   Tonight From Washington  CSPAN  January 7, 2011 6:30pm-11:00pm EST

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making the folks who would pass these enormous unfunded bills that impose a huge debt on generations hereafter somewhat unhappy. but i think they're doing important service by telling us the facts. and last week, i commended the director of the c.b.o. for saying that the c.b.o. will never adjust our views to make people happy. thank you, doctor. god bless him for his integrity and commitment for telling the truth because we have to learn how to deal with the truth, not try to remake it or try to cover it up. now, i couldn't agree more with that. the deficit estimates provided by the c.b.o. are the singular authoritative figuring from which we make all our decisions and have for decades. even if some don't like what the numbers tell us we know that numbers don't lie. i remind my colleagues that today's actions are not, quote, hypothetical, unquote. we truly face a $300 billion
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choice. we can choose to provide invaluable benefits to millions of americans while paying down our national deficit. remember that it will save $134 billion over 10 years, or end health care choices for millions and add $230 billion to the nation's deficit. mr. speaker -- madam speaker, we are considering the first measure from the rules committee of this new congress, and my republican friends have already produced one for the record books. let me give you some of the highlights. first of all, the resolution includes a completely closed process for two separate pieces of legislation. that means we get two closed rules in one. and maybe my republican friends think they can save taxpayers money by rolling all the closed rules into a single resolution. i think that's what they meant by bringing efficiency to government. the first closed rowley on the
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health care bill -- rule on the health care bill does heavy lifting. blocks every single germane amendment submitted to the rules committee. that's not exactly right. it slips in one change without allowing the house to vote on it. the special amendments slipped in with the famous demon pass maneuver is very interesting. it allows the house to pretend that the repeal bill is free even though the budget office says it will raise the deficit by over $1 trillion. that's a neat trick, and now we know the secret weapon for reducing the deficit, a blindfold. this closed process is especially troubling on the health care repeal because this republican bill has had no public hearing, no committee consideration and is not paid for. the second closed rule in this two for one package blocks all amendments to another resolution, to correct a flaw in the swearing in process. apparently the vice chairman of the rules committee was conducting legislative business before he was actually a member of congress. maybe amendments are not
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important here because no member in the house has seen this resolution. since the rule allows the majority leader to make the changes -- allows the majority leader to make changes until the moment it is introduced. if my colleagues are concerned about not having enough time to read this surprised resolution, don't worry. the rule allows the house to debate it for four full minutes. four minutes? have you ever heard of a bill debated for four minutes? fortunately, the rule generously gives the minority two of those four minutes and i guess that qualifies as both efficiency and bipartisanship. finally, the rule allows the house to consider a sweeping press release from the republican leadership, a resolution to replace real patient protection with vague rhetoric. and, mr. speaker, this is a very disappointing day for the house rules committee. the first action in this new congress violates the promise we heard from our republican friends, no public consideration, a completely
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closed process, legislative text no member has read, four minutes of debate on an important constitutional issue and so on. for all those members who were sent to washington like i was to repair our nation's finances, create jobs for millions of the unemployed, help the millions of americans in need, the decision should be simple. i encourage my colleagues to reject the efforts of the republican leadership, keep our promises to our constituents and vote to keep the affordable health care law, and i reserve the balance of my time. the speaker pro tempore: the gentlewoman reserves the balance of her time. the gentleman from california. mr. dreier: madam speaker, i yield myself 10 seconds to say that thomas jefferson said the two thinking people can be given the exact same set of facts and draw different conclusions. well, i just heard what my friend from rochester said. i will say this is a great day for the people's house because we are going to in fact be implementing the commitment that was made to focus on getting our economy back on
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track. with that, madam speaker, i yield two minutes to have very hardworking and thoughtful member of the rules committee who was with us for 12 hours up until late last night, our new colleague from north charleston, south carolina, mr. scott. the speaker pro tempore: the gentleman from south carolina is recognized for two minutes. mr. scott: thank you, madam speaker. mr. chairman, i will say that it's truly an honor to serve on the rules committee. my first experience at the 12th hour experience all day yesterday. what an opportunity to serve the american people. thank you, sir. this is a great opportunity for all of us in america, to kill the job-killing health care bill that is taking jobs away from the private sector. soon we want to make six quick points. we all recognize that the cost of insurance is only going up, up and up. there is a misnoemer that this bill somehow reduces the cost of insurance. it is simply categorically not true.
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shifting who pays for the insurance, the health care cost, does not make the health care cost goes down. it is simply going to continue to rise. second point, when you design a bill that has tax increase after tax increase after tax increase and say that you are reducing the deficit by increasing taxes, it is inconsistent with the reality that the american people want from their congress. third, the individual mandate is simply unconstitutional, and if the individual mandate is not part of the bill, if we don't force every single american to buy insurance, this ponzi scheme simply doesn't work. number four, bringing 10 years of revenue in and paying out six years of benefits and calling that equal, that's a farce. number five, the lifetime benefits -- lifetime benefits, we want everybody in america to have access to health care without any question. the question we ask ourselves is from an actuarial
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perspective, can we pay for a $2.7 trillion expansion, a new entitlement when we have a $76 trillion unfunded liability on the current entitlements? we simply cannot continue to dig a hole and call ourself compassionate. there is nothing compassionate about increasing our entitlements by jeopardizing the future entitlements of americans. and finally, we've heard lots of rhetoric. mr. dreier: madam speaker, i'd like to yield my friend an additional 30 seconds. the speaker pro tempore: the gentleman is recognized for 30 second. mr. scott: finally, we heard lots of rhetoric of what we're doing to senior citizens and women. what we are facing is an opportunity to stop robbing future generations, to stop the unnecessary impact -- the intergenerational cost without even taking into consideration the intergenerational cost, we
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consistently impact unborn americans with legislation that passed under the former house. it is good to be in the house with a brand new speaker and thank you, mr. chairman, for allowing me to be part of the rules committee. the speaker pro tempore: the gentlelady from new york. ms. slaughter: madam speaker, i yield three minutes to the gentleman from massachusetts, mr. mcgovern. the speaker pro tempore: the gentleman from massachusetts is recognized for three minutes. mr. mcgovern: madam speaker, the american people made it very clear in the last election, that they want us to focus on one thing, jobs. but the new republican majority has instead chosen to reopen an old ideological battle. i think that's a mistake. but the good news is that the american people will have the opportunity right at the outset of this new congress to see the clear differences between democrats and republicans. democrats believe that insurance companies should be prohibited from discriminating under the basis of pre-existing conditions. republicans do not. democrats believe we should close the doughnut hole and reduce prescription drug prices
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for our seniors. republicans do not. democrats believe that young people should be allowed to remain on their parent's insurance plan until age 26. republicans do not. democrats believe we should provide tax breaks to small businesses and subsidies to low-income americans to help them pay for health insurance for their workers and their families. republicans do not. and democrats believe that we need to seriously address the budget deficit. republicans do not. as the c.b.o. croble made abundantly clear -- made abundantly clear. it would add $230 billion to the deficit over the next 10 years and another $1.2 trillion in the following 10 years. as far as i can tell, this is the most expensive one-page bill in american history. 114 words. that's $2 billion per word. rather than address those budgetary facts, the new republican majority has simply ignored them, to cover their ears and pretend that the laws
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of arithmetic do not apply to them. in their first order of legislative business, the republicans want to take health insurance reform and toss it in the trash. and how many hearings have they held on the impact of this repeal? zero. how many markups do they have? zero. and most shockingly, how many amendments will they consider in this bill? zero. the new majority whip, mr. mccarthy, said after the election last november, and i quote, when you look at the pledge to america that the republicans have laid out, there is a cultural change in there. there is something that opens up the floor that hasn't been done for quite sometime where bills will be written in the back room, where bills actually have an open rule, where people can bring up amendments on the floor. so much for that. instead of thoughtful, reasonable legislative language that addresses health care issues, the republicans replaced part of their repeal strategy is just a list of happy talk sound bites. it's no more than a press release. so, again, madam speaker, i
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believe we should be focusing on jobs and the economy and in the meantime i urge my colleagues to reject this rule and the underlying reckless bill. i yield back the balance of my time. . the speaker pro tempore: the gentleman from california. mr. dreier: we have 87 new republicans in the house of representatives. there's no more impressive group than the four serving with us on the house rules committee. among them former sheriff noon gent -- nugent, the gentleman from brooksville, florida. the speaker pro tempore: the gentleman is recognized for two minutes. mr. nugent: thank you, adam -- madam speaker. it's new to me. chairman, thank you so very much. we were there last night in the rules committee for 12 hours to hear testimony from a number of individuals. on the democratic side and also on the republican side. let me talk to you about this. over the past year i met with thousands of people from throughout florida's fifth congressional district. whether they be small business
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owners, veterans, or medicare recipients, they ask me to promise, promise to repeal obamacare. it's clear that the american people know more than our democratic leadership in regards to what americans want. obamacare eliminates millions of american jobs. cuts hundreds of millions of dollars from medicare. taxes by almost $500 billion over 10 years for six years' worth of coverage. everybody knows that the health care system's broken and that reform is needed. however the unconstitutional job-killing mandates of obamacare are not the answer. house resolution 9 is an important step in congress working with the american public to find real, meaningful solutions to our nation's health
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care needs. this is the people's house and we should be listening to the people. house resolution 9 will allow us to foster economic growth, job creation, lower health care premiums, and protect medicare. and inform the medical malpractice system that is bankrupting america. for all these reasons i am grateful for my colleague from california, mr. dreier, for introducing house resolution 9 and i'm proud to be an original co-sponsor of that resolution. with that, i yield back the balance of my time. the speaker pro tempore: the gentleman yields back. the gentlelady from new york. ms. slaughter: madam speaker, i yield two minutes to the gentleman from colorado, a member of the rules committee, mr. polis. the speaker pro tempore: the gentleman from colorado is recognized for two minutes. mr. polis: i thank the chair. i rise in opposition to the rule and the underlying bill, the most expensive one-page bill in
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the history of congress and it costs the taxpayers over $200 billion first 10 years alone and over $1 trillion. not only have the republicans as the first bill that we are doing a rule on and facing here on the floor put forward the most expensive one-page bill in the history of congress, but it is not paid for, madam speaker. in addition to not being paid for they have waived many of the notice fors transparency requirements, the regular order that they sought to establish with regard to the way that this congress is run. madam speaker, there were many good ideas and good amendments brought forward by members of both parties yesterday during our session of the rules committee. i want to talk about a few in particular. one, my colleague from michigan, gary peters, brought a proposal that would have made sure that this biggest one-page expenditure in the history of congress did not raise taxes on small businesses. unfortunately that amendment is not made in order under this
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rule and therefore h.r. 2 will be raising taxes on small businesses across the country that are now receiving tax credits for providing health care for their employees. there was also a lot of discussion and i think it's important and the american people know with regard to people with pre-existing conditions. now, we all want to do something for people with pre-existing conditions. there was talk yesterday, in fact when we are talking about h.r. 9, there might be discussion in the future with regard to agreeing on high-risk pools for people with pre-existing conditions, but what this body is being asked to do today and next week is effectively replace something that works for people with pre-existing conditions, namely eliminating prices discriminations with some vague assurance on paper that perhaps someday, some committees, some chairmen might consider. we asked them kindly to consider something that would do something for people with pre-existing conditions. well, madam speaker, that is simply not enough for the people that have pre-existing conditions today, for those who will in the future. if we want to talk about
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improving health care there's ample room to do it but not eliminating protection that is exist. i yield back the balance of my time. the speaker pro tempore: the gentleman yields back. the gentleman from california. mr. dreier: madam speaker, at this time i'm very privileged to yield three minutes to the distinguished former chairman of the republican conference, my friend from columbus, indiana, mr. pence. the speaker pro tempore: the gentleman from indiana is recognized for three minutes. mr. pence: i thank the gentleman for yielding. i would ask unanimous consent to revise and extend my remarks. the speaker pro tempore: without objection. mr. pence: thank you, madam speaker. i rise in support of the rule but i rise from my heart with a deep sense of gratitude to the american people. to urge my colleagues in both parties to join us as we keep our promise to the american people and next week vote to repeal their government takeover of health care, lock, sew stock -- stock, and barrel. i know democrats said at the time that they had made history. i said at the time i thought we broke with history.
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we broke with some of our finest traditions, limited government, personal responsibility, and most profoundly the consent of the governed. on a late sunday night in march, the last majority had their stay . on a tuesday in november the american people had their say. and that brings us to this moment. it is remarkable to hear members in the minority explaining their opposition to this bill. only in washington, d.c., a year ago, only in washington, d.c., could you say you were going to spend trillions of dollars and save people money, and this morning only in washington, d.c., could you say that repealing a $2.7 trillion government takeover of health care is actually going to cost money. pleased to yield. mr. dreier: i thank my friend for yielding. i wonder if he might repeat that line. i think he said only in washington, d.c., can there be
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interpretation that cutting $2.7 trillion in spending is actually going to end up costing the american people, is that what the gentleman was saying? i thank my friend for yielding. mr. pence: i thank the gentleman. reclaiming my time. yes. it must be mystifying for people looking in this morning to hear about the most expensive one-page bill in american history. i say again, only in washington, d.c., could a congress vote to repeal a $2.67 trillion -- $2.7 trillion government takeover of health care and the minority says it will cost the american people money. let me explain, when you mandate that every american buy government-approved insurance whether they want it or need it or not, when you create a government-run plan paid for with job-killing tax increases, when you provide public funding for abortion for the first time in american history, that's a government takeover of health
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care that violates the principles, the ideals, and the values of millions of americans and the american people know it. look, after we repeal obamacare next week, we can start over. with commonsense reforms that will focus on lowering the cost of health insurance without growing the size of government. republicans will waste no time in bringing greater freedoms to the american people, to purchase health insurance the way they buy life insurance, the way they buy car insurance. we'll deal with responsible litigation reform. we'll even use the savings to cover pre-existing conditions. i urge my colleagues to join me in support of this rule but join us as we keep our promise to the american people and repeal their government takeover of health care once and for all. the speaker pro tempore: the gentleman's time has expired. the gentlelady from new york. ms. slaughter: madam speaker, this is not a dispute between republicans and democrats about the $1.3 trillion. c.b.o., the nonpartisan congressional budget office, is saying that. i will now yield two minutes to
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the gentlelady from california, ms. matsui. the speaker pro tempore: the gentlelady from california is recognized for two minutes. ms. matsui: i thank the gentlelady for yielding me time. madam speaker, i rise in strong opposition to the rule and the bill before us. the bill would increase the national deficit by $230 billion. increase costs to individuals, families, and small business owners, and deny the american public the consumer protections they have been seeking for years. repeal of the health care law would also mean the young adults would not be able to stay under a parents' plan. this is something that would have a devastating effect on constituents of mine such as elizabeth. shortly after graduating college she was dropped from her parents' plan and soon developed a severe thyroid condition. as a result, she had to purchase her own individual insurance plan which proved to be a severe financial hardship for her and her parents. thankfully she was able to re-enroll on her parents' plan as of january 1 because of this
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health reform bill. repeal would also mean that senior citizens of sacramento would not see any relief for the medicare part d doughnut hole. the bill would close the doughnut hole critical to seniors in my districts. one such senior regularly pays over $2,000 a month for his prescription drugs. repeal would mean gary and the thousands of other seniors in my district would see no relief from the part d doughnut hole. this is unacceptable. madam speaker, a vote against this rule and against this bill is a vote to protect the american public from unfair insurance company practices. to provide relief to young and old alike, and to stay on the path to fiscal responsible future. i urge my colleagues to vote down this rule and vote against the underlying legislation. i yield back the balance of my time. the speaker pro tempore: the gentlelady yields back. the gentleman from california. mr. dreier: madam speaker, at this time i'm happy to yield one
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minute to a hardworking member of the energy and commerce committee which will be one of those committees when we pass h.res. 9 that will be dealing with ensuring that every single american has access to quality health insurance. our friend from brentwood, tennessee, mrs. blackburn. the speaker pro tempore: the gentlelady is recognized for one minute. mrs. blackburn: thank you, madam speaker. today we do begin a very important process and it is a solid first step. and i stand to support this rule and to support repeal of this law because we have on the law -- on the books a law that doesn't improve the quality of health care. it will not reduce the cost of health care. and it is going to add billions to the exploding national debt. we have listened to the american people. they are smart. and they know that this law is unworkable. it won't deliver on the promises that they made. and the american people voted in overwhelming numbers to repeal it and replace it.
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that is the action that we are going to take. congress cannot wait any longer to get this irresponsible law out of our doctors' offices, out of our lives, and off the books. we in tennessee have lived through the experiment of government-run health care called tenn-care. tennessee could not afford it and the american people know this nation cannot afford a tenn-care-type program on a national level. i support the rule. i yield back. the speaker pro tempore: the gentlelady yields back. the gentlelady from new york. ms. slaughter: madam speaker, i yield one minute to the gentleman from michigan, our ranking member of ways and means, mr. levin. the speaker pro tempore: the gentleman from michigan is recognized for one minute. mr. levin: i ask unanimous consent to revise and extend my remarks. the speaker pro tempore: without objection. mr. levin: this is what the republicans are after, what their repeal would mean. it would take away from millions
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of americans, coverage for kids with pre-existing conditions, coverage for young adults under 26, recommended preventive care would be taken away, it would take away lower drug costs for seniors. and this is what the republican repeal would do. it would give back to insurance companies unreasonable premium increases, unjust policy termses, rescissions, it would take away this, it would give back profits and c.e.o. salaries to insurance companies, not health care benefits. it will give back annual and lifetime limits on benefits. it gives back to insurance companies discrimination author
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against women. these are concrete reasons to vote no on this repeal. the speaker pro tempore: the gentleman's time has expired. the gentleman's time has expired. the gentleman from california. mr. dreier: i yield to a member of the energy and commerce committee, our friend from marietta, georgia, dr. gingrey. the speaker pro tempore: the gentleman from georgia is recognized for two minutes. mr. gingrey: madam speaker, i thank the gentleman for yielding. we have heard a lot of arguments on the other side of the aisle in regard to the $230 billion cost. and on our side of the aisle of course only in america can something actually cost $1.15 trillion in eliminating it that all of a sudden costs $230 billion. yes, ms. slaughter, only in america, only in this congress, numbers do lie. let me just say that what we have been talking about on this side of the aisle, of course, is the voice of american people. it's about 3,000 years ago that
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a little shepard boy walked into that valley of death looking up at all those philistines and that nine-foot giant goliath who had that coat of maile, sword, and javelin, what did david have? a pouch and handful of stones. he hit that giant right between the head, brought him to his knees, and cut off the head of the snake. that pouch and those little pebbles represent the voice of the american people. that's what we have on this side of the aisle. that's why we are going to pass h.res. 9 and we are going to pass h.r. 2 next week and we are going to deliver our promise to the american people to eliminate, to repeal obamacare, the american people spoke loudly. they don't like this bill. the democratic majority in the senate and the president have one last chance to make amends. i think they'll do it. i yield back. . the speaker pro tempore: the
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gentleman from georgia yields back. the gentlelady from new york. ms. slaughter: madam speaker, i yield one minute to the gentleman from massachusetts, mr. markey. the speaker pro tempore: the gentleman from massachusetts is recognized for one minute. mr. markey: this debate is about health care versus don't care. the democrats' health care law lowers prescription drug costs, helps middle-class families pay for coverage for their sick children and expands health care for 32 million more americans, reducing the deficit by $143 billion. the democrats' health care law helps grandma afford her prescription drugs. the republicans don't care about grandma. they want to take back the drug benefits in the new law. g.o.p. used to stand for grand old party. now it stands for grandma's out of prescriptions. the republicans don't care repeal shows they don't care
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about sick children with medical bills, pushing families into bankruptcy. they don't care about grandma and grandpa who need help paying for prescription drugs. vote down this rule so that we can help grandma, sick children and middle-class families struggling to pay for health care. the speaker pro tempore: the gentleman from california. mr. dreier: madam speaker, at this point i'm happy to yield one minute to a hardworking member of this freshman class, the gentleman from san antonio, mr. canseco. the speaker pro tempore: the gentleman from texas is recognized for one minute. mr. canseco: madam speaker, i rise today in support of the rule and in support of an underlying legislation, the repealing of the job-killing health care act. 10 months ago president obama and his allies in the democrat-controlled house and senate committed legislative malpractice when they jammed through the congress and into
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the law a washington takeover of health care. they did so despite the overwhelming opposition of the american people. since its enactment into law, what was already an unpopular law has only continued to become more unpopular. there's no doubt that we need to reform health care in america. however, it's not done by assaulting individual liberties guaranteed in our constitution, bankrupting our children and grandchildren and putting washington bureaucrats and personal relationships between our doctors and our patients. repealing the health care bill will also help encourage job growth to get our economy back on track. our economy's not suffering from a capital crisis. it is suffering from a confidence crisis. mr. chairman, may i -- mr. dreier: madam speaker, i'm happy to yield my friend an additional 30 seconds. the speaker pro tempore: the gentleman is recognized for 30 seconds. mr. canseco: thank you. policies enacted in washington like the health care bill have injected uncertainty into our
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economy that has eroded the confidence of americans to start new businesses or expand current ones to create jobs. the american people have made it clear, they want the health care law repealed and replaced with commonsense alternatives that will lower the cost of health care while also increasing quality and access. after meeting and speaking with thousands of texans in the 23rd district over the past year, this is their message. repealing and replacing the health care bill is one of the promises made to america in the pledge to america. today we are working on that promise as we work to -- the speaker pro tempore: the time has expired. mr. canseco: thank you. i yield back the balance of my time. the speaker pro tempore: the gentlewoman from new york. ms. slaughter: i yield one minute to the gentleman from nouge, mr. pallone. the speaker pro tempore: the gentleman from new jersey is recognized for one minute. mr. pallone: thank you, madam
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speaker. this is nothing but a gag rule. i and so many of my colleagues on the krattic side went up to the rules committee yesterday and asked for amendments and they were almost all excluded from this rule. the republican chairman of the committee says there's transparency. he says that there's an opportunity for participation. he can say it as many times as he wants but it's simply not true. he also said this is a commitment to the american people. there's no commitment to the american people here. the only commitment is to the insurance companies. they're the only ones that are going to gain from repeal of this important legislation because they want to increase premiums and they want to institute discriminatory practices again against women, against men. against those who have breast cancer, or bring back those annual caps or lifetime caps if they have a serious operation and they try to go back again and they don't have insurance. or perhaps the child who's up to 26 and also will not be able
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to get on their parent's insurance policy again. so let me tell you here. the only one that benefits is the insurance company, not the american people. the speaker pro tempore: the gentleman's time has expired. the gentleman from california. mr. dreier: may i inquire of my friend on the other side of the aisle how many speakers she has remaining? ms. slaughter: certainly, madam speaker. we have -- we've got every minute taken. i'm not sure everybody is going to show up. mr. dreier: i'm told 11 minutes are remaining on your side. i think with that i reserve the balance of our time. ms. slaughter: all right. the speaker pro tempore: the gentlelady from new york. ms. slaughter: i'm pleased to yield one minute to the gentleman from michigan, the dean of the house and our leader on health care, mr. dingell. the speaker pro tempore: the gentleman from the great state of michigan is recognized for one minute. mr. dingell: i ask unanimous consent to revise and extend my remarks. the speaker pro tempore: without objection, the gentleman is recognized. mr. dingell: madam speaker, if you listen to the republicans today, they're telling us, don't bother them with the
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facts, their minds are made up. they are unaware of the fact that the congressional budget office says that this is going to create four million jobs in the health care legislation. they don't tell us that the same congressional budget office says that passage of h.r. 2 is going to increase the deficit by $140 billion. and they also are telling us, the american people want this repeal. they don't. they understand what this means. it means that no longer are people going to get the protections that the health insurance bill gives. no more protections that the republicans get their way against pre-existing conditions and recisions, denying people health care because of something that happened to them down the road before. no longer will americans be protected against frivolous and improper behavior by the insurance companies.
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this is a bad role. it is not on facts but on fiction. if this body is going to legislate and legislate well we need the facts, not fiction, no deceit, not misleading statements by our republican colleagues. the speaker pro tempore: the gentleman's time has expired. the gentleman from california continues to reserve the balance of his time. the gentlelady from new york. ms. slaughter: madam speaker, i'm pleased to yield one minute to the gentleman from texas, mr. doggett. the speaker pro tempore: the gentleman from texas is recognized for one minute. mr. doggett: if you are hit by a truck this afternoon or your child contracts a dreaded disease your future ought not to depend on the fine print in an insurance policy you didn't have anything to do with writing. no insurance monopoly should stand between you and your doctor. unfortunately, the republican party has become little more
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than an arm of the insurance monopolies. they asked for a vote to further empower those monopolies and we ask for a vote for american families to empower them. a vote to repeal is a vote to maintain health care costs as the leading cause of bankruptcy and credit card debt in this country. it is a vote to require seniors to pay more, more for prescription drugs, more for diabetes and cancer screenings. we can stand with american families today or we can bend and kneel to the insurance monopolies. the choice is clear. let's vote for american families. i yield back. the speaker pro tempore: the gentleman yields back. the gentleman from california. mr. dreier: i reserve the balance of my time, madam speaker. the speaker pro tempore: the gentleman from california reserves the balance of his time. the gentlewoman from new york. ms. slaughter: madam speaker, i yield one minute to the gentleman and former member of the rules, mr. welch from vermont.
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the speaker pro tempore: the gentleman from vermont is recognized for one minute. mr. welch: i thank the gentlelady from new york. i say, madam speaker, to my republican colleagues, you can't -- you beat us good, you ran on the agenda of defeating health care and repealing it. now you're doing it. own it. admit what it is you are doing. this is not a campaign. we're playing with fire. we're taking away health care benefits to make a real difference to our families. number one, this bill will raise the deficit by $230 billion. fiscal responsibility out the window. second, things that matter to families, their kids starting out getting $10 an hour job without health care. they have it now on their parent's policies. we are taking it away. pre-existing conditions. you have cancer, want to buy insurance, you can't. repeal, you can't. you lose it. lifetime caps. if you are with cancer or diabetes and you need that insurance, you lose it before you can go without it. and preventive care, we're taking it away from seniors who are trying to take care of
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themselves, get those free mammograms, keep the cost of health care down. you are taking it away. admit it. own it. state it proudly. it's what you campaigned on. it's what you're doing. but don't try to sugarcoat what this is about. i yield back. the speaker pro tempore: the gentleman yields back. the gentleman from california. the gentleman from california continues to reserve. the gentlelady from new york. ms. slaughter: madam speaker, i yield one minute to the gentleman from new york -- the gentlelady from california, mrs. capps. the speaker pro tempore: the gentlelady from california is recognized for one minute. mrs. capps: madam speaker, the issue facing the country is jobs. instead of repealing health care we should bring up a jobs bill like the china currency reform. and so i rise in strong opposition to the rule and the underlying bill. today, i speak on behalf of millions of americans who are currently benefiting from the law and have yet been shut out of the legislative process. the way in which this legislation has been brought to this floor is a travesty. before the affordable care act
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became law in the house alone, we held nearly 80 hearings on the merits of reform. but this bill to repeal this life-saving law has not had a single hearing, not one amendment has been allowed for an up or down vote here today. that's probably because the majority knows hearings would show that the law is already a real success. while we may disagree on the policy, we should be able to agree on the process. and this, my friends, is not the way to move legislation in the house of representatives. we've all agreed upon that, and that's why i urge my colleagues, especially the new members who ran on the promise of ensuring an open congress, vote against this rule. i yield back. the speaker pro tempore: the gentlelady yields back. the gentleman from california. the gentleman from california. mr. dreier: madam speaker, i reserve the balance of my time. the speaker pro tempore: the gentleman from california continues to reserve. the gentlelady from new york. ms. slaughter: madam speaker, i yield one minute to the gentleman from california, mr.
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garamendi. the speaker pro tempore: the gentleman from california is recognized for one minute. garegare a lot of talk here on the -- mr. garamendi: a lot of talk here on the floor about job killers. the affordable health care bill creates some 400,000 jobs. the repeal of it is actually a killer of human beings. some 40,000 americans die every year for lack of health insurance. that's the reality. repeal this bill and you're going to find more americans dying. also, you're doing away with this repeal of the affordable health care act, of the patients bill of rights. i was insurance commissioner in california. i know exactly what the insurance companies will do if this repeal goes forward. they will continue to rescind policies. they will continue to deny coverage. they will continue to make sure that those 23-year-old children that have graduated from college will no longer be able to be on their parent's policies. this repeal is perhaps the worst thing you can do to
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americans in their health care. and besides that, you will significantly increase the deficit by $230 billion. . i yield back. the speaker pro tempore: the gentleman from california. the gentleman continues to reserve. the gentlelady from new york. ms. slaughter: madam speaker, i ask unanimous consent to insert into the record the figures from today's jobs report showing that since the enactment of health reform in march, 2010, the which has created 11.1 million private sector jobs. the speaker pro tempore: without objection. ms. slaughter: i yield one minute to the gentleman from california, mr. thompson. the speaker pro tempore: the gentleman from california is recognized for one minute. mr. thompson: madam speaker, i rise in strong opposition to this rule that we are taking up today instead of focusing on jobs. the new majority in the house ran on the platform of fiscal responsibility. this bill flies in the face of that promise by adding $230 billion in the short run and over $1 trillion in the long run to our deficit. as important, under repeal the
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medicare trust fund will become insolvent by 2017. that's just six years away. pushing medicare over the cliff by passing this repeal breaks the sacred trust with our nation's seniors to help provide health care coverage in retirement after a lifetime of working and paying taxes. that's why i went to rules committee last night with two colleagues and offered and amendment to guarantee that repeal will not go forward unless it's certified that that repeal will not shorten the life of the medicare trust fund. sadly, the rules committee didn't allow us to help protech america's seniors, they didn't allow that amendment. we will not be able to vote for that amendment on the floor. and i urge a no vote on this rule. the speaker pro tempore: the gentleman yields back. the gentleman from california. mr. dreier: may i inquire, first how much time is remaining on each side, and of my colleague how many more speakers she has.
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the speaker pro tempore: 7 1/2 for california. 5 1/2 for the gentlelady from new york. mr. dreier: madam speaker, then in light of that i'm very happy to yield one minute to a physician, another hardworking member of this freshman class, the gentlewoman from new york, ms. hayworth. the speaker pro tempore: the gentlelady from new york is recognized for one minute. ms. hayworth: madam speaker, as a physician i understand the profound importance of the goals of the health care bill passed last year. to assure that all americans have affordable, portable health insurance, providing access to good medical care. i also understand that -- the disruptions this law is already causing to our economy, the predictable side effects of legislative bad medicine, and the reason we must repeal and replace it. the bill we will be considering is in no way nearly imbolic.
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it represents the true will of the american people. the majority of whom have stated time after time to this day that they reject this law. the house's vote to repeal is the first step towards assuring that all americans will have the quality, choice, and innovation in health care. that they expect and deserve. we need to proceed expeditiously . according to the rule on which we vote today, with the understanding that we are taking meaningful and crucial action. thank you. the speaker pro tempore: the gentlelady yields back. the gentlelady from new york. ms. slaughter: thank you, madam speaker, i yield one minute to the gentleman from organizeon, mr. defazio. the speaker pro tempore: the gentleman from oregon is recognized for one minute. mr. defazio: previous speaker's right. this is not symbolic, it's real. in fact, the republicans are
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going to allow the return of the worst abuses of the health insurance industry. pre-existing condition exclusions. taking away your policy when you get sick. lifetime and annual caps. throwing your kids off your policies. the republican repeal of this bill would enable all those things for their very, very generous benefactors in the insurance industry. i haven't had a single constituent and i know you haven't, begged you to bring back these abuses. is that what you are doing? is that what they want? you could take steps right now, in fact, to rein in this industry, and 400 people in this house voted for it last year. let's take away their unfair exemption from antitrust law so they can't collude to drive up prices, they can't collude to take away your insurance, they can't collude to that throw your kids off and all the other anti-competitive things an industry does. i offered that amendment to rules last night. the republicans, despite the chairman of the committee and
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others having voted for it last year, would not allow it. this is an insurance industry bill plain and simple. 7 the speaker pro tempore: the gentleman from california. mr. dreier: at this time i'm happy to yield one minute to another hardworking physician, a member of this new freshman class, the gentleman from south pittsburgh, tennessee, dr. desjarlais. the speaker pro tempore: the gentleman from tennessee is recognized for one minute. mr. desjarlais: madam speaker, today i rise to support the rule and to support the repeal of the obama health care law. as a physician who has practiced medicine in rural tennessee under the onerous tenn care law, i know parent that this law does not work. it restricts access to health care. it increases the cost, and it does not deliver on the promises the minority made when they passed the law. the american people have had their say. they do not want this bill.
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they want it repealed and they want to see health care reform that will increase access and lower costs. i yield back. the speaker pro tempore: the gentleman yield back. the gentlelady from new york. ms. slaughter: i yield one minute to the gentleman from texas, mr. green. the speaker pro tempore: the gentleman from texas is recognized for one minute. mr. green: thank you, madam speaker. i thank my colleague from the rules committee for allowing me to speak. i ask unanimous consent to place my full statement in the record. the speaker pro tempore: without objection. mr. green: i rise in strong opposition to this rule on h.r. 2, patient's rights repeal. just yesterday the congressional budget office said that this repeal would cost $230 billion in additional federal debt. it's amazing this is our first major piece of legislation and the republicans are already adding to the national debt. the issue facing our country is jobs. instead of repealing health care, we should be bringing up a jobs bill like the china currency reform. where is that bill on the floor
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with the new majority? let me tell you what this bill will do. at least in texas we will see tragedy happen. 161,000 young adults will lose their insurance coverage through their parents' health care plan. that's only in texas. 2.8 million texans who have medicare coverage will be forced to pay co-pays now for preventive surgeries, like mammogram services. medicare will no longer pay for the annual visit of nearly 2.8 million texans and many more americans for medicare. 128,682 texans on medicare will receive higher prescription costs if this bill is repealed. i yield back the balance of my time. the speaker pro tempore: the gentleman yields back the balance of his time. the gentleman from california. mr. dreier: madam speaker, could i inquire again of my friend how many more speakers she has remaining at this point? ms. slaughter: i have four. mr. dreier: i think with that i reserve the balance of my time. the speaker pro tempore: the gentleman reserves the balance
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of his time. the gentlelady from new york. ms. slaughter: i'm pleased to yield one minute to the gentleman from maryland, mr. cummings. the speaker pro tempore: the gentleman from maryland is recognized for one minute. mr. cummings: thank you very much, madam speaker. i rise in opposition to this rule. despite ardent promises from republicans that all bills would be considered under regular order, this resolution has neither been debated nor voted on by a single committee of jurisdiction. additionally, the recently passed republican rules package requires that all legislation be fully paid for and yet the republican leadership has already publicly declared that they have no intention of paying for what is estimated to be a $230 billion increase in the deficit that the repeal of health reform would create by 2021. according to the congressional budget office. worse than the republicans' already broken promises are what this rule and the underlying resolution would do to children, seniors, and all americans suffering from illnesses.
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i strongly oppose this rule and yield back. the speaker pro tempore: the gentleman yields back. the gentleman from california. mr. dreier: madam speaker, at this time i'm happy to yield one minute to another great new member. the gentlelady from 340 -- missouri, miss archer. --miss archer. miss archer: i can testify as a person newly elected and been on the campaign trail for a while in the fourth district we have small businesses that are not hiring and not expanding because of the health care bill. we have got to repeal this so that we can create more jobs. i'm a small business owner myself and i can tell you since this has passed that health insurance premiums have voted -- skyrocketed. the anticipation of the mandate will be forced on them. if we want to get serious about creating jobs, we need to start by repealing this.
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this is also a bill to rein in the run away spending. that is devastating our country and it's mortgaging our children's future. as a another that's important to me. this bill put another $1.2 trillion of debt on our country. we cannot afford that. and lastly, this is a freedom bill. the people in my district do not want the government telling them they have to buy a private product and then mandating what is in that product. that is unconstitutional. by passing this last year, you have taken away my freedom, the freedom of the people of the fourth district, and the people of this country. we deserve better. thank you. the speaker pro tempore: the gentlelady from new york. ms. slaughter: let me inquire of my colleague how many speakers he has left. mr. dreier: madam speaker, let me just say to my friend from rochester that i will be the final speaker.
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ms. slaughter: you're ready to close. mr. dreier: i'm ready to close. ms. slaughter: thank you. mr. dreier: how many more speakers does the gentlewoman have? ms. slaughter: two left. i would like to yield one of those minutes to ms. sutton from ohio. the speaker pro tempore: the gentlelady from ohio is recognized for one minute. ms. sutton: thank you, madam speaker the issue facing this country is jobs. instead of rushing to the aid of the insurance industry to reinstate their right to engage in egregious discriminatory practices of discriminating against adults and children based on pre-existing conditions, instead of allowing the doughnut hole to continue to bear down on our seniors, we should be passing real jobs legislation. urgently we should be bringing up jobs bills that will make a real difference like putting an end to china's currency manipulation. we have heard the numbers, 2.4
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million jobs lost across the country. 92,000 jobs lost in ohio. and 5,700 jobs have been lost in my congressional district due to china's deliberate and abusive trade policies. we can do something about this issue today and we should. it makes a real difference. i hope that our friends across the aisle will stand with american businesses and american workers and put an end to the abusive practice of china's currency manipulation. the speaker pro tempore: the gentleman from california. mr. dreier: i'll continue to reserve the balance of my time. the speaker pro tempore: the gentleman continues to reserve. the gentlelady from new york. ms. slaughter: i yield for a unanimous consent request, the gentleman, mr. butterfield, from north carolina. the speaker pro tempore: the gentleman is recognized. mr. butterfield: i thank the gentlelady. i ask unanimous consent that my statement be included in the record. the speaker pro tempore: without objection. ms. slaughter: madam speaker, i yield one minute to the gentleman from new jersey, mr. andrews. the speaker pro tempore: the gentleman from new jersey is recognized for one minute. mr. andrews: i ask unanimous consent to revise and extend my remarks. the speaker pro tempore: the gentleman is recognized. mr. andrews: thank you, madam
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speaker. there are 15 million americans unemployed this morning. they do not want us to play politics with health care, they want to us work together to create jobs. there is a job killer loose in america. the job killer is unfair trade practices that force the outsourcing of our jobs. there is a proposal that has broad agreement between republicans and democrats to bring fair trade back to america. if we defeat the previous question, we will move to amend the rule to make in order the currency reform for fair trade act which simply says this. as the chinese have been slamming the door shut on our workers and products, we have been opening our shelves in american department stores. no more of that. no more outsourcing of jobs. no more unfair trade practices. a fair and level playing field for american workers.
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let's work together to create jobs and stop the politics and the waste of time of health care. vote no on the previous question. i yield back. the speaker pro tempore: the gentleman yields back. the gentleman from california. the gentleman from california. mr. dreier: i'll continue to reserve the balance of my time. the speaker pro tempore: the gentleman continues to reserve the balance of his time. the gentlelady from new york. ms. slaughter: i would like to pause for unanimous consent request for mr. engel, the gentleman from new york. the speaker pro tempore: the gentleman from new york. mr. engel: i rise in opposition to this amendment. it seems that the openness of the new majority promised us lasted half a day. and changed the order remain the same. i urge my colleagues to vote no. the speaker pro tempore: the gentlelady from new york. ms. slaughter: madam speaker, if we are able to beat the previous question, i will move to amend the rule to make in order a bill, h.r. 2378, from the last
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congress, the currency reform for fair trade act, which invokes our anti-dumping laws and provides relief for american workers and companies injured by unfair exchange rate policies. . i ask unanimous consent to insert into the record the text of the currency reform for the fair trade act. the speaker pro tempore: without objection. ms. slaughter: and i yield to the gentleman from new york for a parliamentary inquiry. >> madam speaker, i have a parliamentary inquiry. the speaker pro tempore: the gentleman will state his parliamentary inquiry. mr. weiner: what is the current whole number of the members of the house? the speaker pro tempore: the whole number of the house is 435. mr. weiner: madam speaker, further parliamentary inquiry. the speaker pro tempore: the gentleman will state. mr. weiner: can the speaker state that all have been sworn as under the constitution?
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the speaker pro tempore: the speaker, it's her belief that all have been sworn. mr. weiner: thank you. ms. slaughter: i yield back the balance of my time. the speaker pro tempore: the gentlelady from new york yields back the balance of her time. the gentleman from california. mr. dreier: madam speaker, i yield myself the balance of the time. the speaker pro tempore: the gentleman is recognized. mr. dreier: thank you, madam speaker. this is the first act of the 112th congress and i am particularly gratified that we had six new members of this 87-member republican class participate in this debate. because, madam speaker, they have come here with a very, very strong, powerful message from the american people. that message is that we have to make sure that we create jobs and get our economy back on track. even though we've goten this positive news of the reduction of the unemployment rate from 9.8% to 9.3% this morning, tragically last month only 105,000 new jobs were created. that's not enough to sustain our economy. you have to create at least
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150,000 just to be treading water. and so we know that the american people are continuing to suffer. and the message that has come from the american people through these 87 new members is that we have to have a laser-like focus on creating jobs, getting our economy back on track and reduce the size and scope and reach of the federal government. my friend, mr. pence and i, had an exchange which we said only in washington, d.c., can a $2.7 trillion increase, saying that cutting that, eliminating that, scrapping that will in fact cost money. it's absolutely crazy, but that's what they're arguing, and through their sleight of hand with the congressional budget office they are continuing to claim that somehow it will save money.
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madam speaker, we are doing what we told the american people we would do. it's very simple. beginning last year we said we would have a very clean, up or down vote, an up or down vote should we maintain this $2.7 trillion expansion with government mandates and increased taxes or should we repeal it, and that's what we're going to be voting on after the three-deleover next week. and, madam speaker, are we in fact committing ourselves to doing everything that we possibly can to ensure that every single american has access to quality, affordable health care and health insurance? and that's what the resolution i introduced, h.res. 9, will do. it will direct the six committees of jurisdiction to begin immediately working on ways in which we can drive the cost of health insurance down.
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i personally believe that we need to allow for the purchase of insurance across state lines which is now forbidden under the karen ferguson act. i believe we -- the karon-ferguson act. i believe we need to have lower rates. we need to have pooling for pre-existing conditions. we need to expand medical savings accounts and, yes, madam speaker, the fifth thing we need to do is to have meaningful lawsuit abuse reform so that resources can go towards doctors and not trial lawyers. and, madam speaker, these are the kinds of things that these new members are telling us need to be done and that's exactly what passage of this rule will make happen. madam speaker, let me say i urge support of this rule and i urge support of the underlying legislation, and once again, with zeal, enthusiasm and gratitude, i move the previous
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>> earlier today, the house began debate to repeal the health-care law passed last year. majority leader eric cantor and minority whip steny hoyer came to the floor to discuss issues related to the bill and the direction the chamber will take the rest of january. we begin with remarks from congressman hoyer. this is 25 minutes. jobs but in any event, i thank the gentleman for announcing the schedule. i want to say we're disappointed however, as he was in -- when he was in my position, that we are -- that we don't have a committee process for this very important piece of legislation. i think it's important from your perspective and it's important from our perspective, though we may have different perspectives on whether it should pass or fail. but it is an important piece of legislation. there was no committee process.
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no hearings. no opportunity fothe public to be heard on the bill. no opportunity for the members to testify. with respect to that bill. no witnesses were heard. and furthermore, under the rule, of course, we have been given no opportunity to amend. the gentleman, when he was in my position, would repeatedly indicathow disappointed he was that there were no amendments allowed on certain bills. i want to reiterate that concern and given the lack of amendments, i want to clarify what he believes will be the finishing of votes on wednesday. i understand debate will begin on tuesday. is that -- and conclude on wednesday? mr. cantor: i ask the gentleman to repeat the question. mr. hoyer: what time do you
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expect to conclude business on wednesday? mr. cantor: i would say to the gentleman, madam speaker, that it is our intention to conclude by 7:00 p.m. on wednesday. mr. hoyer: i thank the gentleman for that response. in light of the fact that you have made -- your side has made a pledge to allow ample time for members to read and consider, and notwithstanding that they've already not pursued that as vigorously as i think you would have hoped and perhaps would have hoped as well, in the 112th congress, i was wondering if the gentleman can enlighten us on what he expects to consider the rest of january after next week so members might have opportunities to anticipate issues that you're going to be bringing forward. mr. cantor: i thank the gentleman, madam speaker. as to the inquiry about
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openness and the ability for members to have time to read the bills, as well as for the public to realize its right to know, we on our side believe in making sure there is that adequate time and we posted on monday legislation coming to the floor for this week and next. so i would say to the gentleman from maryland, madam speaker, that it is our intention to continue to uphold our commitment to the three-day rule, allow for the public's right to know as well as members themselves to understand what it is we're voting for. as to the gentleman's comments regarding the up or down vote on obamacare repeal, i the gentleman has looked at the postings online, he'll know that the repeal resolution is a page and a half. this is a repeal of a bill that was the subject of significant
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legislative time and other over the course of the last two years. it is clear that the public has litigated and in essence has decided its position on that bill given the results of november's election. and it's -- it comes down to whether you're for obamacare or against it. that's what the vote is. again a page and a half. that's what the bill is. so we have committd to continuing in the vein of an open process when it comes to trying to get it right as far as replacing the health care status quo. and we have committed and the speaker has committed to making sure that our committees will go through regular order, members of the minority and majority will have ample time to engage in par -- engage and participate in the discussions
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around what type of health care americans deserve and what type of health care they want. which is how we will proceed when it comes to the so-called replacement resolution and its implementation. i would also point out to the gentleman from maryland that the rules committee has cepted the amendment proposed by the gentleman from utah as far as a suggestion that he had regarding the s.g.r. formula and the reimbursements for physicians under the medicare program. again, we are trying to work in a fashion that open, that is as inclusive as we can, as the speaker said in his remarks, the speaker says we had, and was correct when he said we had no open rules under the last congress. we innd for that not to be
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the case here. i know that the gentleman joins me in the desire for us to be able to work together and we believe that that will provide the best way forward for that. as to the gentleman's question about the remainder of january, madam speaker, we intend to focus on the theme of this congress, which is cut and grow. we're going to be talking about ways to cut spending, we are going to live up to our commitment to bring a spending cut bill to the floor each and every week, madam speaker, we also intend to focus on what it is that is impeding job growth in the economy and will be asking our committees to begin focusing on regulaons that are being promulgated and pursued throughout the administration and its agencies that are precluding job growth. it is our hope, though, madam speaker, that these committees, our committees, will be fully
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organized by the end of the month so we can begin a process of regular order and i yield back. mr. hoyer: i thank the gentleman for his comments. obviously the health care bill he seeks, he and his party seek to repeal had probably more consideration, more open debate, more transparency, more amendments, more hearings, than almost any bill that i have considered as a member of this congress over the last three decades. full and opeconsideration. amendments offered from both sides in committee on a very ample basis. but i am glad to hear that you agree that there have been ample debate time for that. there has not been any debate time in committees or amendments on the repeal of that law.
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i certainly am hopeful the gentleman does not mean to say that if the majority party concludes that the american public have already decided an issue, that there won't be, therefore, that will be the exception to the rule that you have put forth in terms of full and ample notice, debate, amendment process and transparency. i would certainly hope that that would not be the case. i don't expect it to be the case and i hope it won't be let me say in addition, that i'm very pleased that the majority party allowed in order the amendment by mr. matheson. as you know, we tried to have a permanent fix to the reimbursement of doctors who took medicare patients, unfortunately, the minority party in the senate which had the opportunity to do that precluded us from accomplishing
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that objective. so i'm pleased that that needs to be done. we need to have a stable funding expectation by doctors when they provide services to medicare patients, to senior, as we want them to do and we want them to continue to do. i'm pleased you athrude amendment. i would hope th members on your side would be supporting that amendment as we will on this side. let me ask you now, mr. majority leader, i am very concerned, i expressed this on the floor, your rules in my view, provide for some $5 trillion to be incurred in additional deficits. . they allow that because you have exempted almost all of the possible reductions in revenues, tax cuts, reductions in revenues, notwithstanding no
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reduction in spending. well, if you reduce revenues and you don't reduce spendig, commensurately, inevitabl you will create a large defit which inevitably will be paid by future generations. that's been the experience that, again, i have had when we had significant tax cuts in the 1980's. and last decade, the decade of 2000, 2001, 2003 where we created very large deficits. my presumption is you will be finding a commensurate reduction s in spending your tax cuts that you want to continue. if you don't do that, deficits will inevitably follow. the majority party has not done that in years past. is it your expectation that that will occur in the future?
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but the question i want to ask you as well is that you have provided in your rules essentially ignoring c.b.o. scores. the nonpartisan congressional budget office which serves us has issued a preliminary score for the republican patients' bill of rights, they believe it will increase the deficit by $230 billion in the first 10 years by repeal and $1.2 trillion in the second 10 years. my question is having deemed in the rule today a provision allowing the chair of the budget committee, mr. ryan, to ignore the c.b.o. score, will the majority continue to ignore c.b.o. scores on legislation for the rest of congress or will we be fiscally responsible n. my view, and adhere to -- responsible, in my view, and adhere to the advice and counsel we receive from c.b.o. i yield.
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mr. cantor: madam speaker, i respond to his first question by saying that washington doesn't have a revenue problem it has a spending problem. and we believe that it is better to allow folks to keep pore of -- more of their hard-earned money so we can see a return to growth in our economy and that we are dedicated to making sure we deal with the spending problem here in washington. as i said before to the gentleman, we are intending and will bring to the floor each and every week a bill that cuts spending. we are very focused as you know in bringing spending down to 2008 levels to make sure that we are abiding by our commitment to live according to the same rules that everyone else does while businesses a families are living within their means, tightening their belts, there is no reason in the world why washington can't as well. i'm sure the gentleman agrees with me on that.
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as for the issues surrounding the c.b.o., the issue that we have and dispute we have is not with the congressional budget office. c.b.o. scores what's put in front of them. the reality is the obamacare bill relied on smoke and mirrors and budgetary shell games in order to present the pture that it presents or allegation to represent. -- alleges to represent. madam speaker, there is nothing that has changed about the flawed assumptions underlying the old score of the obamacare bill, only the dates have changed. this is the same gimmicks, producing more false deficit reduction, and in fact real spending increases. in fact, as the gentleman knows, madam speaker, the medicare's chief actuary says that the obamacare bill represents a maze of mandates, tax hikes, and subsidies that will push costs
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up. the bottom line, madam speaker, is we need to stop arguing about inside baseball budget gimmicks. there is no question that a new open-ended entitlement program will grow unsustainably fast, will drive costs up, and could potentially bankrupt this federal government as well as our states. so with that, madam speaker, i yield back. mr. hoyer: i thank the gentleman. i want to say to my friend, the continuing rhetoric is washington doesn't have a revenue problem it has a spending problem. americans in every family that i know understand that their renues directly impact on their spending and vice versa. and if they don't, they have a real problem. they don't have enough revenue to meet their expenditures, they
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have a problem. and if their spending exceeds their revenue they have a problem. i tell friend, i understand what you're saying and i have heard this rhetoric all of my career here in the congress. i tell my friend that when president reagan was president we never overrode a presidential veto of an appropriation bill because it spent too much. he veeyoted it spent too much, never had a veto overwritten. nevertheless we incurred an additional $1.5 trillion in deficits. under president bush, george h.w. bush, we didn't override any veto of his and we incurred an additional trillion dollars. that was $2.5 trillion plus. under the clinton administration , of course, economic program as you and i both know that your party universally opposed, we
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had a surplus. the only president in your lifetime and i think in mine, which is substantially longer, that's had four years of surplus. now, i know you say, response that mr. dreier gave to me is that well, yes, we took over the congress in 1995. that's corct. and of course not only did you take over the congress in 1995 but in 2000 you took over the presidency as well and corolled the house and the senate and the presidency. and during that period of time we didn't pass any appropriation bills on our side. you were in full charge during the bu administration, first six years, and $3.5 trillion of deficit spending was incurred making a total of over $5 trillion of deficit spending during the time that your party
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took the position that we didn't have a revenue problem we had a spending problem. well, it ended up being a $5 trillion deficit problem adding to the deficit for our children. and for my grandchildren and for my great granddaughter. i'm concerned about that. and that is why i'm so concerned about statutory pay-go. sticking with c.b.o. scores, and accommodating our spending and revenue. they are both related, obviously, and to ignore that -- eliminating revenue without eliminating spending doesn't cause deficits i think is to ignore reality. i'm sorry, i hope my friend would talk to mr. ryan, the budget committee, and bring us legislation which would, in fact, do what you and i want to
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do. that ieliminate the deficit. if we got two messages during this past election, in my view, it was, a, focus on creating jobs. we got to get to work. americans are hurting. we had some good job numbers this month. we have created over $1.3 million jobs this past year as opposed to losing almost four million jobs in the last year of the bush administration. that's progress. but as i have said so often, it's not success. suess will be when every american who wants a job learn to work, can -- willing to work, can fine a job that can support him or her and their families. but we need to not pretend that revenues and spending are not inextricably related. if we give up revenues before we do the difficult thing, the tough thing, the adult thing, as mr. boehner said, and cut the
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spending, then cut the revenues if americans are buying it, then we ought to be paying for it and not passing along the bill to our grandchildren. i would hope the gentleman would pursue that. if the gentleman wants to respond to that, i'll say something about health care, briefly. mr. cantor: madam speaker, the gentleman and i have gone through these discussions the last few years and when we get into discussing the past, i normly posit a quote from winston churchill when he said if we open a karl between the past and present we shall find we have lost the future. and what my response is, madam speaker, we are looking to see that we do take the tough steps and cut spending. i'm hopeful with all the renewed enthusiasm that all of us have gained after the election towards fiscal sanity that the gentleman and his caucus can join us and vote with us in
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terms of the spending cuts that we'll be bringing to the floor every week. the gentleman speaks about revenues. and absolutely as an ongoing concern this government has to be concerned with that. but we first and foremost must understand that i think both of us realize, madam speaker, that in order to have revenues, we've got to have growing economy. so there is a balance. and that is where i perhaps our two visions diverge. it is my hope that we can work together by putting priorities in place, cutting spending, growing the economy. that's the formula by which we will be operating. i'm hopeful we can operate on those formulas and that formula together. i yield back. mr. hoyer: i appreciate the gentleman's comment and simply in closing, madam speaker, let me say this. i hope we can cooperate, but we do have a divergence as my
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friend pointed out. that's the nature of what the house of representatives does, debates differentiate points of view. frankly, my experience as i have said is that when we diverged in a point of view in 1993, when my republican friends took the position that accommodating revenues to spending would, in fact, from their perspective, be a job killer, they talk a lot about job killing legislation. they all voted against that legislation in 1993. and in fact some of my colleagues on my side of the aisle lost their election because of voting for that piece of legislation. in fact, however, it helped create the most robust economy anybody in this chamber has experienced in their lifetime.
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it created over 22 million jobs as opposed losing eight million jobs in the last administraon under president bush so that there was a substantial difference which you can see, touch, and feel. and read about and know about. so i tell my friend, yes, there's a difference of opinion, but there is no difference of opinion on what happened. and when winston churchill, you quoted before, and of whom i'm a great fan, one of the things that winston churchilwas most known for was trying to remind his british friends, don't forget what dictators and despots do. remember, and i make no aspersions, i want to make that clear, i'm simply saying he believed strongly in learning from the past. and not continuing to make mistakes and not continue to do what failed in years before.
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so i agree with the gentleman. looking at the past is for instruction on how to make the future better and to create those jobs that both he and i want to create. and america is certainly lookokk >> health care again dominated the chamber today. seven hours of debate will start tuesday with no amendments allowed. a final vote on the repeal is expected wednesday. the senate has already said that they will not take up the repeal and president obama has vowed to veto any repeal effort. new aspect of c-span programming first. we are joined by a relatively new we have a new programming block called "american history tv."
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>> as book tv has done for book lovers, we hope to do the same thing for history lovers. from 8:00 a.m. on saturday until 8:00 a.m. on monday, just a few features of our programming block includes american artifacts, a program where we take years behind the scenes to see something that normally would not get to see at a historic site, a museum, or archive. there we talk with the curator or on-site historian to see the artifacts that tell the story of the site. another new feature is lectures in history. we travel around the country to visit the classrooms of top american history professors and you can see a day in their class as they talk about their expertise in american history. it is like going back to college for a day. in addition to that we have programming every single weekend on various aspects of the
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presidency and also the civil war. just in time as the nation begins to commemorate the 150th anniversary of that conflict. finally, we also have surged -- searched the archives for historic newsreels and video. a couple of examples of that, we are coming up on the 50th anniversary of president eisenhower's farewell address and a few days later, the did anniversary of president kennedy's inaugural address. we will be to those in the coming weeks. >> how will we ever by c-span be different? >> in keeping with c-span is tradition, we give you long form programming on lectures and history. we show you the entire class and take you to historic speeches and historic sites. you'll experience them in the same way as if you were there yourself. you will see just as we would. >> how can people see this american history tv? >> we are on c-span3 from 8:00
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a.m. saturday until 8:00 a.m. monday, so 48 hours every weekend. unlike c-span, which is not in over 100 million homes, c-span3 is in 41 million homes. people can get in touch with their cable or satellite company and say they want american history t be on c-span3. >> what is the first weekend looking like? >> is going to be a busy one. this weekend we have a couple of live events at the american historical association up in boston. we are covering up panel tomorrow on the 1980's, the reagan era. sunday there is a discussion on national security and the public's need to know. >> we anticipate we have a lot of history buffs in our audience. people can sign up for weekly
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alerts to know what is coming up. how do you do that? >> there are a number of ways to get in touch with us. you can visit our website at c- and click on the e-mail alert button. you will get our program schedule in advance before the weekend coming up. in addition, while you were there, you can see our twitter icon and click on that. >> this weekend on "american history tv" live coverage of the american historical association. sunday, roundtable on national security and the public's need to know as the congressional black caucus marxist 40th anniversary. an oral history on congressman charles rangel. then from the bureau of engraving and printing, learn about the history of u.s. currency. see the complete weekend schedule online that c-
7:58 pm you can also have our schedules emailed to you. >> this weekend, from monsoon, robert kaplan on the geopolitical importance of the indian ocean region. thomas daily on his experiences during the first months of the surge. eduardo porter says there is a price on every decision a person makes, and most do not realize how often it is a motivating factor in shaping their lives. by the complete schedule that >> disease span networks provide coverage of politics, public affairs, non-fiction books and american history -- this c-span networks. it is all available on television, on-line and on
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social media networking sites. we take c-span on the road with our digital bus, mobile content vehicle. bringing our resources to your community. it is washington you are right, the c-span networks. now available in more than 100 billion homes. created by cable, provided as a public service. >> this is c-span, public affairs programming courtesy of america's cable companies. next, president obama talks about the latest unemployment figures and announces new members of his economic team's. then federal reserve chairman ben bernanke testifies before the senate budget committee. after that, the house debates rules for the upcoming health care repeal debate. now, president obama introduces four new members of his economic team and notes that the economy has created jobs for 12 months straight for the first time since 2006. the new appointees include gene sperling, a former adviser to
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president bill clinton, who will be director of the national economic council. this event in maryland took place a few hours after the latest jobs report from the government which showed a decline in the anne lamott rate last month from 9.8% to 9.4%. this is 20 minutes. [applause] >> have a seat. it is wonderful to be with all due today. i want to make a few quick acknowledgment.
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prince george's county executive is here. i want to thank the ceo and owner of thompson creek manufacturing and all of the employees here at thomsons. thank you so much for your hospitality. [applause] i want to acknowledge the family and guests of those who are standing behind me today. it is wonderful to be here. i want to thank wreck for showing me how you manufacturing -- how you manufacturer more efficient windows. this is a family business. he was just 13 when his father opened the company. back then, his family lived above the store. he started out sweeping floors.
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three decades later, at thompson creek has expanded and it has already outgrown this new 80,000 square-foot facility that it moved into just three years ago. i will bet somebody -- that is what happens when you are in charge. building this business has been an extraordinary accomplishment for the family. it speaks not only to hem, and it speaks to all of the employees it speaks to the promise of america. if you have a dream and you are willing to work hard you can succeed. it is at the heart of who we are at -- as a people.
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it is what helps give us someone the courage to start a business or the accompanied the confidence to expand. it is what leads to new products and new ideas. technologies that have not only made up the world's largest economy, but the most innovative the economy in the world. making it possible for businesses to succeed is how we ensure that our economy succeed and all of our people succeed. it is how we create jobs. that is what guided by a demonstration pour the past two years. government cannot guarantee thompson creek or any business will be successful. but government cannot knock down barriers, like lack of affordable credit or high cost for investment, or high cost for hiring. we can do something for that.
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we can remove obstacles in your path. that is why we cut taxes for small businesses over the last two years. pour example, when a tax break for hiring unemployed workers, thompson creek was able to build its workforce to 300 employees in just one year. they took advantage of the tax credits that we put into place. we also passed a tax credit for products like energy-saving windows. that led to a 55% boost in the sales at this company. rick was telling me that when that tax credit got in place, the marketing arm of thompson creek got busy. that is exactly what we intended. that is exactly what we wanted to see. explaining to the american people that you can save money on your energy bill. incentives like these are helping companies across
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america. the jobs numbers released this morning reflect that growth. the economy added more than 100,000 jobs last month and the unemployment rate fell sharply. we know these numbers will bounce around from month to month. the trend is clear. we saw 12 straight months of private sector job growth. that is the first time that has been true since 2006. the economy added 1.3 million jobs last year. each quarter, it was stronger than the previous quarter. the pace of hiring is beginning to pick up. we are also saying more optimistic economic forecast ahead. including a payroll tax for workers and tax cuts that
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encourages investment and innovation and hiring. i fought for those packages because even though our economy is recovering, we still have a lot to do. this was a brutal recession. the worst in our lifetimes. it left a lot of destruction in its wake. more than 8 million jobs lost. even though we have created 1.3 million jobs, we saved a whole lot of jobs, we still have a lot of folks who are out there looking, still struggling. we have a goal that we are digging ourselves out of. our mission has to be to accelerate hiring. that depends on making our economy more competitive so that we are fostering new jobs and training workers. it depends on keeping up the fight for every job and every business and every opportunity.
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standing with me here today are men and women who will help america fulfill this mission. let me just introduce each of them. we are joined first of all by gene sperling, do i have appointed director of the national economic council. give him a big round of applause. [applause] he has been an extraordinary asset to me and this administration. he has been working with me. he led our efforts to pass a small-business jobs bill to help companies all across america. he also helped negotiate the tax compromise that we pass at the end of this year. he is a public servant who has devoted his life to making this economy work. one of the reasons i have selected him is that he has done
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this before. this is his second tour of duty. in his tenure in the clinton administration during the late 1990's, and he helped formulate the policies that contributed to certification -- turning deficits to surpluses and a time of prosperity and progress of four american families in a sustained way. the people bring bill level of intelligence and it's your work ethic that he brings to every assignment that he has ever taken. he does so with such decency and integrity. we are lucky to have you back. i know you will do a terrific job. he is going to have jason firm and working with him. i am pleased to elevate -- elevate him to be principal deputy at the national economic council. [applause]
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over the past two years, i have relied on jason's advice and expertise on a range of economic issues. from helping design the emergency steps we took to protect -- prevent our economy from sinking. i am confident that he will continue to do terrific work. we're also joined by somebody i have come to rely on as an adviser and a friend since my first days as a presidential candidate. heather higgins bottom is the director and the point person of education as we pursue some of the most innovative and important reforms in decades. i am proud to nominate heather to now serve as deputy director of the office of management and budget. she understands the relationship between numbers on a ledger and the lives of real people.
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as we make cuts that are necessary, i want to make sure that have ever there so that we are -- have had their there so we are meeting our fundamental obligations to our people. [applause] finally, i am nominated katharine abraham to the council of economic divisors. [applause] she brings a wealth of experience as an economist, as a commissioner during the clinton administration, i am confident that she will provide the kind of unbiased, unvarnished advised fellow bus craft the best policies to strengthen this economy in the years to come. back part of our mission, part of this team's mission, will be
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to maximize the steps we have taken to spur the economy. one of the most important is allowing businesses to immediately deduct the entire cost of certain investments like new equipment that was taken a look at. this is a policy that i fought for over the past two years. we were able to pass it finally as part of the tax-cut compromise. it is going to make a real difference for our economy. i know thompson creek is planning to take full advantage of this tax break. that will help thompson creek and renovate, expand, and had another hundred new employees right here. -- and at 100 new employees right here. that is good. [applause] u.s. companies like this all of the country and the treasury
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department estimates that overall, this will accelerate $150 billion in tax cuts for 2 million businesses over the next two years. i want to urge all businesses with capital needs to take advantage of this temporary it expensive provision. we expected to lower the average cost of investment by more than 75% for companies like thomson creek. it is a powerful new incentive for business. it is a great opportunity for companies to grow and add jobs. now is the time to act. companies who are listening out there, if you are planning or thinking about making investment sometime in the future, make those investments now and you will save money. that will help us grow the economy. it will help you grow your business. it only underscores the
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importance of not letting up on our efforts. i am looking forward to working with other and to -- with other and catherine and jason and everybody at the white house. we have one focus. making sure that we are duplicating the success of companies like thomson creek all over the country. we want this economy to grow. we want to put people back to work. we will not rest until we have fully recovered from this recession and we have reached that a brighter day. thank you very much, everybody. [applause]
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>> gene sperling held the same
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post in the clinton administration from 1997-2001. after serving as deputy director of the national economic council from 1993-1996. he is counselor to treasury secretary timothy geithner her courage in that role, he is a lead policy advisor on fiscal issues. including job creation and small-business issues. he graduated from the university of minnesota and yale law school. next, a federal reserve to chairman ben bernanke testifies before the senate budget committee. after that, the house debates rules on the upcoming health care repeal debate. another chance to see president obama talking about the latest unemployment figures and the announcements for new members of his economic team. ponte tomorrows "washington journal," a look at the u.s. economy.
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congressional quarterly frank oliveri. >> i think news organizations have adapted. is it great that we are not overall doing as much for news? the public has some responsibility here, too. the public affairs responsibility of keeping themselves informed. she looks at the wars in iraq and afghanistan. at 8:00 on c-span. >> ben bernanke says that the u.s. economy is showing signs of
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self sustaining recovery. he cautioned that it might take up to five years for unemployment levels to fall to a historic norms. his remarks came before the senate budget committee. other topics included the fed's $600 billion plan to buy bonds to stimulate the economy. changes to the tax code and the financial help of cities and states. this is just over 2.5 hours. >> i want to welcome everyone to the senate budget committee this morning. i especially want to welcome some of recessions. senator sessions has not formally then recognized as ranking member of the budget committee, but that is just a formality. he will be as soon as the organizing resolution is adopted. i intend to treat senator sessions as the ranking member here today. that is the appropriate thing to do. to i very much welcome senator
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sessions as my partner on this committee. he has considerable knowledge of budgets and budget process and i very much look forward to working with him. as we confront these significant challenges facing the country. i also want to welcome ben bernanke back to the budget committee. this is his third appearance here. we have always benefited by his wise counsel. when the history of this period is written, you will be one of the heroes of the peace in averting what could have been a financial collapse. i was in the meetings with the former secretary of the treasury and would you when you warned us of how serious the financial circumstances were in late 2008. those moments will be forever riveted my memory. i personally believe you and
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hank paulson, followed by this administration, but have taken steps that were critically important to averting if i need to collapse. -- a financial collapse. we know we are on an unsustainable course with the budget, borrowing about 40 cents of every dollar that we spent. clearly, that cannot continue for very long. on the other hand, we also face a fragile economy. with one in every six workers in this country unemployed or underemployed, that requires our immediate attention as well. my own belief is that we need to put in place a plan this year to get our fiscal house back in order. that plan needs to be phased in over a period of time along the lines of what the fiscal
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commission proposed. i think we also understand that -- where we have come. this has been an extraordinary period in the country's economic history. i'd like to just go over a brief history of what we have experienced. i personally believe the federal response didn't avert what could have been a financial collapse. i believe it was that serious. in the meetings i was and with the then secretary of the treasury hank paulson and you, mr. chairman, risks were very clear. we have seen some progress made. in fact, important progress made, private sector job growth has returned, although not as much as we would have liked. we heard the numbers this morning, something over 100,000 jobs created in the private sector. a dramatic improvement from where we were back in january of 2009 when we were losing 800,000
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private sector jobs a month. now we have had 12 consecutive months of private sector job growth. and economic growth, the pattern is the same although actually somewhat better. in the fourth quarter 2008, the economy actually contracted, actually shrunk by 6.8%. more recently in the third quarter of 2010, we saw positive growth of 2.6%. again, a dramatic improvement while not as strong as we hoped. we have now had five consecutive quarters of growth. we've also seen a dramatic rebound in the stock market, after falling to a low of just about 6500 in march 2009. now the dow is now over 11,500. and two of the most respected economists in the country, mark
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zandi who is a consultant to the mccain campaign, and alan blinder, a former deputy chairman of the federal reserve, did an analysis that measure the impact of federal actions, the t.a.r.p. stimulus, and also included the fed's monetary policy actions. and they concluded as follows. we find that its effects on real gdp, jobs and inflation, are huge. and probably a bird what could have been called great depression 2.0. when all is said and done the financial and fiscal policies will have cost taxpayers a substantial sum. but not nearly as much as most had feared, and not nearly as much as if policymakers have not acted at all. if the comprehensive policy responses say the economy from another depression as we estimate, they were well worth the cost. this next chart shows doctor
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blinder and dr. zandi's estimate to the number of jobs we would have without the senate -- the federal response. it shows we would've had 8 million fewer jobs in the second quarter of 2010 if we had not had the federal response, the t.a.r.p. and the stimulus. we see a similar picture with the unemployment rate. unemployment rate averaged 9.7% in the second quarter. according to dr. blinder and dr. zandi, if we have not had the federal response, the unemployment rate would have been 15% in the second quarter, and would've continued rising to over 16% in the fourth quarter of 2010. so clearly the federal response to the economic crisis has had and continues to have a significant positive impact on the economy. but we are not out of the woods. we can't forget that as i mentioned before, one in every
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six of our fellow citizens are either unemployed or underemployed. the unemployment rate in december which was also announced this morning was 9.4%. this is still far too high. the federal reserve projections show the rate is likely to come down only slowly, averaging still in the height eight percentage point range by the fourth quarter of 2012. but as i noted, we must now also pivot to addressing the long-term fiscal imbalances that the country confronts. i believe we are at a critical juncture. we have been borrowing as i mentioned earlier, 40 cents of every dollar that we spend. that cannot continue much longer. spending is at the highest level as a share of our national income in 60 years. revenue is at its lowest level
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as a share of our national income in 60 years. i believe that indicates you've got to work both sides of that equation if we are to make progress. gross federal debt is already expected to reach 100% of gdp this year, well above the 90% threshold that many economists see as the danger zone. a leading economist who came before our commission and has come before this committee, doctor reinhard, who have studied 200 years of fiscal crises around the world, she concluded that when government debt as a share of the economy exceeds 90%, and she is referring here to gross federal debt, that economic growth tends to be about one percentage point lower than it would be if debt levels were not so high. if that associations were applied to united states today, it would translate into the
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potential economic loss of hundreds of billions of dollars and substantially fewer jobs for americans. so i believe the deficit and debt reduction plan assembled by the fiscal commission could provide a blueprint and a way forward. the plan would stabilize publicly held debt by 2014 and then lower it to 60% of gdp by 2023. and roughly 30% by 2040. i emphasize that's the publicly held debt, not the gross debt. the bipartisan commission who voted for the plan, 60% of us supported either interestingly enough five republicans and five democrats and one independent. i think that demonstrates that we can reach across the aisle to do things that are critically important for the country, facing up to the debt threat is something we must deal and we must do it together. with that we will turn to
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senator sessions for his opening remarks. and again, i want to welcome him as ranking member of the budget committee. >> thank you, chairman conrad. it's an honor to be here, to be with you. i respect you very much, and value our friendship and enjoy being ribbed by you. and i look forward to working with you to help make our country better. we have some real serious challenges ahead of us. i also want to note how much i have admired our former ranking member, judd gregg. i know you and he had a great relationship. i think his leadership was particularly valuable. people listen to it. they trusted his judgment, and i hope that i can come close to being as effective as he has been in this position. i'd like to share some thoughts and concerns.
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i know that when the mortgage crisis hit and the economy was whacked, a lot of people got together and tried to make some decisions. mr. chairman, it would've been better i think had we seen the mortgage crisis two years in advance and taken action, it would have made the crisis less real. and i say that -- i say that because we are to be humble about where we are today. i don't think anyone fully understand this magnificent world economy we are a part of. i don't think anyone or is it, whether the fed reserve, secretary of treasury, even congress, can have a little meeting and be sure that the action we take is going to have certain impacts on this massive economy of which we are a part, when you're confused in the and you need to return to the fundamental's of blocking and
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tackling, the fundamentals of paying your bills on time in creating some confidence in the economy. so today is our committee's first hearing of the 112th congress. we need on the heels of a historic election. it's important, that election. the american people rebelled against wasteful washington spending, and a government that has grown too large and too intrusive. the american people also rebelled against a political establishment that has placed our country on a path of fiscal decline. solving our nation's economic and debt crisis is about more than economics. it's about protecting our way of life, at home, and our standing abroad as a great nation. and it's about honest and moral. our goal is not an era of austerity but an era of prosperity. restoring fiscal discipline and strengthening the private sector is the only way to create growth
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and opportunity for every hard-working american, and it is the only way to protect our country's greatness and its vital role in the world. to solve our problems we must speak about this candidly. our nation's debt will soon be equal the size of our entire economy, 40% of our budget relies on borrowed funds. in 2009 the interest on our debt alone cost $187 billion. and the congressional budget office projects that under the president's budget the interest payment will climb to $916 billion in 2020. that exceeds any other part of our budget and is growing faster than any other part of our budget. vastly superior to defense budget. we are on a path that is unsustainable. the only real question is how much, how much will it is between us and the edge of the
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cliff. the american people understand the situation. they understand that years of unchecked federal spending has squandered our nation's wealth and threaten our children's future. the american people understand that a leak in washington seems to forget and that is you can only live beyond your means for so long. eventually the bill comes due. fundamentally it is immoral to take from my children their wealth. so, so we spent unearned wealth today. there are other problems. considering the housing bubble, for years congress delayed action to address ready and favorite of federal reserve was asleep at the switch and fail to sound the alarm. then one day the bubble burst and the whole world changed. no one knows exactly what will happen if we continue our spending on the current course,
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but we must not find out. a recent piece in the "washington times" describing some of the works of potential consequences and, we need to be more specific about what the consequences will be. he said quote, one day the treasury will hold an auction and it won't be buyers. the federal reserve will step in as a buyer of last resort. conjuring money from the ether, by bonds. the injection of massive liquidity into the financial system will trigger fears of hyperinflation caused the dollar to plunge and interest rates to rise if the resources of the european union and international monetary fund our stretch to rescue the finances of tiny greece and ireland. the united states will not only be too big to fail, but too big to bailout. absent the emergency action by the government, the economy will plunge into a depression roughly
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three times more acute than the recession we just experienced. i don't know if it would happen like that, but parents also had an editorial by an experienced wall street of 45 years warning of a hyperinflationary spiral. the writer explained that while the federal reserve could monetize the debt, historically they quote breakpoint occurs when a government borrows an amount equal to 40% of its expenditures for an extended -- extended period of time. in a recent interview, chairman bernanke, you said you were 100% confident the fed could prevent such inflation, but i'm not sure the masses of the universe, you being maybe the master master, how confident you can be about that. been wrong before. and while we can debate just how great an imminent the risk is, there is no debating what the american people have declared in poll after poll.
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we are on the wrong track. but where is the leadership from our administration? just last december the president would only agree to maintain current tax rates if congress agreed to new spending, all borrowed, that would add another $250 billion. instead of slowing down, president obama accelerated. but simply easing off the pedal won't solve the problem. when you are driving toward a cliff at 90 miles an hour, you can't just slow down to 60. you need to hit the brakes and steer on to the right road. for too long congress, washington compromise, has changed only the pace and not the direction that we are going. last november the american people said enough. that's precisely what they said, i believe. they sent congress a new
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freshman class with a clear set of instructions. those instructions include the budget that changes our trajectory and genuinely reduces the size, cost, and burden of government. we can learn from those who aren't setting a strong example. in new jersey governor chris christie has a plan to close his state funding gap without raising taxes. in britain, the new conservative government has taken strong action and has a plan to reduce the deficit from 10 to 4% of gdp in just four years. as britain's chancellor of the exchequer said, it's a hard road, but it leads to a better future. yet some would argue that reducing government spending, even a small amount, will reduce the quality of our life, but the surest way to lower the quality of life in america is to
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continue on our current course. spending without restraint, crushing private enterprise, and mortgaging the inheritance of our children. the challenges ahead may be difficult, but the choices we face are not. we need to limit government, control spending and create an environment where the free market can thrive and flourish it's a roadmap our founders laid out more than two centuries ago. there's no doubt it will work again. america's progress is not a thing of the past. we can do this. to achieve this progress we can no longer compromise our nation's founding principles. instead we must fight for, and in so doing hope to find common grounds in doing so. chairman bernanke, i look forward to discussing these and other issues with you today. i look forward to getting your thoughts on how you and the administration, you're working together, with the plan for
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strengthening our future. thank you, mr. chairman,. >> thank you so much, senator sessions. i just want to say i welcome your analysis. we may not agree on every solution. i think the one thing we are agreed on is that we are on an unsustainable course, and we've got an obligation. we've got a very specific, serious and somber obligation to come up with a plan and to do it sooner rather than later. and i look very much forward to working with you on that. >> thank you. i value those comments. >> thank you that you so much for coming. i want to tell the committee that chairman bernanke is also offered to come up here in a closed session with committee members to discuss what he sees with respect to the economy. we very much welcome you being here as our first witness as we embark on the challenge of putting together a budget for this year and succeeding years. welcome. >> thank you.
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thank you chairman conrad, senator sessions and other members of the committee. i want to thank you for this opportunity to offer my views on current economic conditions, recent monetary policy ask, and issues related to the federal budget. the economic recovery that began a year and half ago is continuing, although to date at a pace that has been insufficient to reduce the rate of unemployment significantly. the initial stages of the recovery, the second half of 2009 in early 2010, were largely attributable to the stabilization of the financial system, expansionary monetary fiscal policies and a powerful inventory cycle. gross -- growth slowed some this past spring as it went and its european sovereign debt problems lead to increased volatility in financial markets. more recently however we've seen increased evidence a self-sustaining recovery in consumer and business spending may be taking hold.
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in particular real consumer spending rose at an annual rate of 2.5% in the third quarter of 2010, and at able indicator suggested it likely expanded at a somewhat faster pace in the fourth quarter. business investment and new equipment and software has grown robustly in recent quarters albeit from a surely low level. as firms replace aging equipment and made investments that had been delayed during the downturn. however, the housing sector remains depressed as the opening of vacant houses continue to weigh heavily on both home prices and construction, and non-residential construction is also quite week. over all the pace of economic recovery seems likely to be my resolve or in 2011 than it was in 2010. although recent indicators of spending and production have generally been encouraging, conditions in the labor market have improved only modestly at best. after the loss of nearly a .5 million jobs in 2008-2009, private payrolls expanded at an
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average of only about 100,000 per month in 2010. of pace barely enough to accommodate the normal increase in the labor force and, therefore, insufficient to materially reduce the unemployment rate. on a more positive note a number of indicators of job openings and hiring plans have looked stronger in recent months and initial claims for unemployment insurance declined through november and december. notwithstanding these hopeful signs, the output growth is likely to be moderate in the next few quarters and employers reportedly still reluctant to add to payrolls. considerable time likely will be required before the unemployment rate is returned to a more normal level. persistently high unemployment by dampening household income in confidence could threaten the strength of sustainability of the recovery. moreover, roughly 40% of the unemployed have been out of work for six months or more. long-term unemployment not only opposes the exceptional hardships on the jobless and
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their families, but also erodes the skills of those workers and may inflict lasting damage on the employment and earnings prospects. recent data show consumer price inflation continued to trend downward. the 12 months ending in november prices for personal consumption expenditures rose 1.0%. and inflation excluding the relatively volatile food and components which tends to be a better gauge of underlying inflation trends was only 0.8%, down from 1.7% a year earlier from about 2.5% in 2007, the year before the recession began. the downward trend in inflation over the past two years is no surprise given the low rates of resource utilization that has prevailed over that time. indeed as a result of the weak job market, wage growth has slowed along with inflation. over the 12 months ending in november average hourly earnings have risen only 1.6%.
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despite the decline in inflation, expectations have remained stable. for example, the rate of inflation households expect over the next five to 10 years has measured by the thomson reuters university of michigan surveyed of consumers has remained at a narrow range over the past few years. with inflation expectations stable, those levels of resource utilization expected to remain low, inflation is likely to be subdued for some time. although it is likely economic growth will pick up this year and the unemployment rate will decline somewhat, progress toward the federal reserve statutory objectives of maximum employment and stable prices is expected to remain slow. the projections submitted by the adult market committee or of all in see, showed that notwithstanding growth in 2011 and 2012, most participants expect the unemployment rate to be close to 8% two years from now. at this rate of improvement they
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could take four to five more years for the job market to normalize fully. fomc participants also predicted inflation to be at historically low levels for some time. very low rates of inflation raised several concerns. first very low inflation increases the risk that new adverse shocks pushed the economy into deflation. that is, a situation involving ongoing declines in crisis. experience showed deflation induced by economic slack can lead to extended periods of poor economic performance. indeed, even a significant proceeds risk of deflation may lead firms to be more cautious about investment and hiring. second, with short-term nominal interest rates already close to zero, declines in actual and expected inflation increase respectfully, both the real cost of certain existing debt and the expected real cost of new borrowing. by raising effective debt burdens and by inhibiting new
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household spending and business investment, higher real borrowing costs create a further drag on growth. finally it is important to recognize that carries a very low inflation generally involve very slow growth in nominal wages of incomes as well as in prices. i have already alluded to the recent deceleration in average hourly earnings. in circumstances like those we face now, very low inflation or deflation does not necessarily imply any increase in household purchasing power. rather because of the associated deterioration of economic performance, very low inflation or deflation, arising from economic slack is generally lead to reductions rather than gains of living standards. in a situation which unemployment is high, expected great to remain so and inflation is unusually low, that fomc would normally respond by reducing its target for the federal funds rate. however the federal reserve target for the federal funds rate has been close to zero since december 2008 leading
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essentially no scope for further reductions. consequently for the past two years that fomc has been using alternative tools to provide additional monetary accommodation. notably between december 2008 and march 2010 that fomc purchased about $1.7 trillion in longer-term treasury and agency backed securities in the open market. the proceeds of these purchases ultimately find a way to the banking system with a result of the depository institutions to hold a high level of reserve balances with the federal reserve. although longer-term securities purchasers are different tool for conducting monetary policy than the more familiar approach of managing the overnight interest rate, the goals and transmission mechanisms of the two approaches are similar. conventional monetary policy works by changing market expectations for the future path of short-term interest rates which in turn influences the current level of longer-term interest rates and other financial conditions. these changes in financial
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conditions and affect household and business spending. by contrast security purchases by the federal reserve put downward pressure direct on longer-term interest rates by reducing the longer-term securities held by private investors. these actions affect private sector spending in the same channels as conventional monetary policy. in particular the federal reserve earlier program of asset purchases appeared to be successful in influencing longer-term interest rates, raising the prices of equities and other assets, and improving conditions more broadly. thereby helping stabilizing the economy and support the recovery. in light of this expense and with the economic outlook still unsatisfactory, late last summer the fomc began to signal to financial markets it was considering providing additional monetary policy accommodation by conducting further asset purchases. at its meeting in early november the appleton city formally announce its intention to purchase an additional
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$600 billion in treasury securities by the end of the second quarter of 2011, or about one-third the fight of securities purchased in earlier programs. the fomc also maintained its policy adopted at its august meeting of reinvesting principal received on the federal reserve's holdings of securities. that fomc stated it will review its asset purchase program regularly invited income information and will adjust the program as needed to meet its objectives. importantly the committee remains unwavering passion and we fully committed to price stability any particular to maintaining inflation at a level consistent with the federal reserve's mandate for the congress. in that regard it bears emphasizing the federal reserve has all the tools it needs to ensure that he'll be able to smoothly and effectively exit from this program at the appropriate time. importantly the federal reserve's ability to pay interest on reserve balances held in federal reserve banks will allow it to put upward pressure on short-term market interest rates and dust tight monetary policy we needed can't
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even if bank reserves remain high. moreover, the fed has invested effort into developing methods to drain or immobilize bank reserves as needed to facilitate the schools -- when conditions warrant. if necessary the committee could also tightened policy by redeeming or selling securities on the open market. as i met him before the budget committee is worth emphasizing defense purchases of longer-term security are not comparable to ordinary government spending. in executing these transactions the federal reserve requires financial assets, not goods and services. ultimately at the appropriate time the federal reserve will normalize a balance sheet by selling these assets back into the market, or by allowing them to mature. in the interim the interest of the federal reserve earns from the securities holdings as to the feds assistance to the treasury. in 2009, 2010, those remittances totaled about $120 billion.
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fiscal policymakers also face a challenging environment. our nation's fiscal position is deteriorated since the onset of the financial crisis and recession. to a significant extent this deterioration is the result of the effects of the weak economy, along with the actions that were taken to these through sessions of steady financial markets but in the planning for the near-term, fiscal policymakers will need to continue to take into account the low level of economic activity and the still fragile nature of the economic recovery. however, in an important part of the federal budget deficit appears to be structural rather than cyclical. that is, the deficit is expected to be unsustainably elevated even after economic conditions have returned to normal. for example, under the cbo's so-called alternative fiscal scenario, which assumes that most of the tax cuts enacted in 2001 and 2003 on a permanent and that discretion as spending
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rises at the same rate as the gdp, the deficit is projected to fall from its current level of about 9% of gdp to 5% of gdp by 2015. rise to about 6.5 a set of gdp by the end of the decade. in subsequent years the budget outlook is projected to deteriorate even more rapidly as the aging of the population and continued growth in health spending. under this scenario federal debt held by the public is projected to reach 185% of the gdp by 2035. up from about 60% at the end of fiscal year 2010. the cbo projections by design and ignore the adverse effects of such high debt and deficits would likely have on our economy. but if government debt and deficits were to grow at the pace and vision in this scenario, the economic and financial effects would be severe. diminishing confidence in the part of investors and deficits
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will be brought under control would likely lead to sharply rising interest rates on government debt and potentially to broader financial turmoil. moreover, high rates of government borrowing would drain funds with adverse long run affects the u.s. output incomes and standards of living. it is widely understood that the federal government is on unsustainable fiscal path, yet as a nation we have done little to address this critical threat to our economy. doing nothing will not be an option. the longer we wait to act, the greater the risks and the more wrenching the inevitable changes to the budget will be. by contrast the prompt adoption of a credible program to reduce future deficits would not only enhance economic growth and stability in the long run, but could also yield substantial near-term benefits in terms of lower long-term interest rates and increased consumer and business confidence. plans recently put forward by
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the president national commission on fiscal responsibility and reform, and other prominent groups, provide useful starting point for a much-needed national conversation about our medium and long-term fiscal situation. although these are his proposals differ on many details, each gives a sobering perspective on the size of the problem, and offers some potential solutions. of course economic growth is affected not on by the levels of spending but also by the composition and structure. i hope that in addressing our long-term fiscal challenges, the congress will seek reforms for the government tax policies and spending priorities that serve it on to reduce the deficit, but also to enhance the long-term growth potential of our economy. for example, by encouraging investment in visit passion in fiscal and human capital, by providing necessary infrastructure and by reducing disincentives to work into safe. we cannot grow out of our fiscal imbalances, but a more productive economy would ease the trade-offs we face.
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thank you, mr. chairman. senator sessions. i look forward to taking a question. >> thank you for your testimony. i want to go to your final point. that is the budget committee. we have of our colleagues, and the country to propose a fiscal policy going forward. but i hear you saying is it is quickly important that we adopt a credible plan, longer-term plan to deal with our deficits and debt. is that an accurate understanding of what you're saying to us? >> that's correct, mr. chairman. our fiscal issues are very long-term in nature. they increase the difficulties increase over time. merely addressing this your spinning is not going to solve the problem. we need to develop a plan, an incredible player, won the markets will accept as plausible to address the longer-term structural deficits that we
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face. >> the fiscal commission proposed a plan that would reduce the debt over time by $4 trillion, which was stabilize the debt in the short term. but importantly bring the debt down as a share of the economy to roughly publicly held debt to 30% of gdp. that's over an extended period of time. is that about the magnitude, besides a plan that is necessary to? >> senator, no one knows exactly what the desirable debt-to-gdp ratio is in the long run. you mentioned a 90% number as an upper level of comfort. i think in the near term i think we need to focus on stabilizing the debt-to-gdp ratio. under the alternate scenario of the cbo, it just rises indefinitely and that certainly is not sustainable. if we could achieve in the next decade, two or 3% reduction, that would be sufficient to
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bring the primary deficit close to zero and was stabilize over the next decade. we need additional steps after that. i think stability is the first up, bring it down as a bonus if we can do that. >> that was really the conclusion of the commission. the conclusion of the commission was, job one is to stabilize the debt. we talk about these different measures of debt. publicly held debt is currently roughly 60%. the gross debt is currently about 90%. and most of the advice to the commission was you've got to stabilize it, publicly held debt at 60%, gross debt at 90%. but over time you really need to bring it down. you shouldn't stabilize it and consider that you finish the job. because you'd need to have a margin to deal with future shocks. is that your judgment as well? >> yes, mr. chairman, but
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stabilize would be a very important first step. >> job one, stabilize. second question is the timing of imposing the tough choices that need to be made here on both the spending side of equation and the commission proposed roughly to point to $2 trillion of spending cuts, propose nearly $1 trillion of new revenue. the rest of the savings was savings of interest. in terms of when you pet it that is a critical question. the commission's conclusion was you ought not to take the really tough steps that need to be taken for the next several years. you need to begin picking a to a drop -- you need to adopt a plan to cut the tough medicine needs to wait until the economy is on stronger ground.
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what would your recommendation be to us? >> mr. chairman, i think the issue is credibility. if we can come is not sufficient to say we are not doing anything now because of the recession. we will do something later. not specify what that is. i think if we could adopt a credible plan that is specific enough and credible enough, to address the long run situation, that would be the most positive thing that we could do. and in doing so we could get really all the benefits without having to take actions that would endanger the very near-term recovery, which is still somewhat fragile. >> that was very much the conclusion of the commission. it's not enough to say we will do something in the sweet bye and bye. you've got to adopt a plan. you've got to put in place. you've got to put in place legislatively so people know, yeah, we are going to cut spending. we are going to improve the revenue base. we are going to shave savings of
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interest costs. and it's got to be credibly scored. it's got to be real. but it shouldn't, shouldn't have the bite, a curve too soon or you endanger this fragile recovery. you made another set of comments i've that was very important. and that was the composition of the spending reductions, the composition of the revenue is also critically important for future economic growth. you are saying look, you have to pay attention to human capital, education. you've got to pay attention to infrastructure because that improves the economic competitive position of the united states. but when you are imposing the spending cuts you got to go after things that are superfluous. and goodness knows as we look across federal spending there are places that we are not doing things that enhance economic growth. there are things that constitute waste. although the idea that just
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cutting waste audit abuse is going to solve this problem is, i wish it were the case, but it's necessary but not sufficient. on the revenue side, where the best things we could do is broaden the tax base, lending some of the tax expenditures. but simultaneously reducing rates to make america more competitive. is that what you had in mind when you talk about paying attention to the composition of the changes that are made? >> yes, mr. chairman. on the first point, the national income accounts don't distinguish between government consumption and investment very sharply. there is a technical distinction. we need to think about making investments for the future as opposed to simply spending our seed corn on current needs. so thinking about government programs, we should ask the question will this provide benefits in the future, provide more productive competitive economy in the future. on the attack site i don't think
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it's controversial among economists that rising rates combined with multiplication of extension, productions, credits and so on leads to a tax cut which is very complex and can distort economic decisions. i think all of the major deficit reduction committees have taken the opportunity to talk about the need to lower rates but a low, close the loophole so as not lose revenue. so i think that is something i hope the congress will talk about. if not at all, to address the long-term deficit issues but also to think about making our tax code and our spending priorities more friendly. >> i will take, there's nobody that can participate in this process that didn't include this tax system that we have is just completely outdated. you know, it does not take account of the world that we live in today.
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the other conclusion of the commission was that you've got to everything on the table. spending, revenue, and every part of federal spending has to be dealt with. and you know, even defense. one of the most startling, i received my colleagues, one of the most startling pieces of information that came to the commission was 51% of the federal workforce, is the department of defense. that does not count contractors. when we asked the defense analysts who came before the commission how many contractors does the department of defense have, they told us they couldn't tell us. not because it was secret. it's because they did not know. when we asked them what was the range. they said between one and 9 million. that's a pretty broad range. so we've got issues throughout the federal government that we
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will have to address. i very much appreciate the good advice that you've given us. senator sessions. >> by the way, we're going with eight minute rounds. a little bit longer than usual because of the numbers who are here. and i've tried to respect that in my time, and help others as well. >> thank you, mr. chairman. first, mr. bernanke, let me pursue the question that revolves around your confidence about being able to prevent inflation. you note that you remain unwavering committed to price stability in your statement. and in particular maintain inflation at a level consistent with the federal reserve's mandate. in that regard it bears emphasizing that the federal reserve is all the tool it needs to ensure that it will be smoothly and effectively exit from this program at the appropriate time.
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well, forgive me if i am less confident. that you know precisely when and how to exit. and if you can do so smoothly. and i noted that the bond market and the comment seems almost in consensus view now around wall street and investors. bonds are bad investment, that presumably because they can affect a realistic reality of an increase in interest rates in the future, as a result of quantitative easing, deficit and the like. can you assure us? it looks to me like, wouldn't you agree, that investors are getting nervous already. >> senator, first on your earlier comment about the 100% certainty, what i was talking about there wasn't that we would
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know exactly with certainty the right moment. what i was trying to convey was i thought i was certain that we have the tools we need. it's always the case that we are reversing monetary policy in a period of growth that it's a matter of judgment you can be too early, too late. that is to for normal monetary policy as those unusual monetary policy. so i'm not try to claim our missions. and, of course, it does possible that we'll be either a little too slow or a little too quick, and we would do are very, very best to move at the right time. as far as inflation is concerned though, again and the actual inflation rate is at essentially a postwar low. and inflation expectations look very stable. >> what about ,-comthem is their difference between interest rates on the federal debt and inflation? >> the interest rates on the federal debt are also quite low, of course. in the index bond market the breakeven inflation rates are about what you think they want to be if people expect that over
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the next five to 10 years the fed will keep inflation at about 2% which is about where we think we got to be aiming. we will pay close attention to the inflation situation, and we take that very, very seriously. >> but tell me just, trying to be, bring a little common sense to an honest question to you, it does seem that the bond market is nervous. it does seem to me that the quantitative easing plan continued and they continue again. and that the deficit continues. at an unsustainable rate. why shouldn't people be worried that eventually there could be a tipping point reached in a rather dramatic surge in our interest rates would occur? >> on the monetary policy side, as i said we are in a situation similar to where we always are, which is we need to find the
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right moment to begin tightening. you mentioned the bond market is expected short-term rates to rise in the future. that would be corresponding to the fed tightening and reversing the easy money policies. on terms of fiscal side, there i agree with you. i think that if congress and the administration don't find a credible plan for controlling new long-term structural deficits, there could be very serious problems in financial markets, and inflation. that's the history of many, many situations in the past. so i do very much urge this committee to look forward strong and credible actions to control the federal debt. if that is done, then i don't think that inflation will be a long-term problem and what we are trying to do i think in the short term is to create an appropriate balance between the risks of inflation and the risks
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of deflation which have not yet gone. >> with regard to unemployment i think you made clear in your statement, but it's important for us to understand and even though the rate dropped three tens, four-tenths, 9.4, the 100,000 jobs, 103,000 jobs added is really sort of treading water about what you have to have to just maintain the current employment rate, is that not right, and that's not really a number that we can celebrate today? >> it's about what we expected, but as you say it's not a number that is going to come if we continue at this pace we will not see sustained decline in the unemployment rate. >> my predictions were as much as 275,000 jobs being added. >> i was serving on our prediction and certainly not most wall street predictions. there was a number that came out of so-called adp number which was very high. but that is only loosely connected with the actual numb
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number. >> i think the american people are deeply concerned about we -- about where we're headed economically. their jobs are at stake. i believe that's a legitimate concern. to what extent do you have, a plan, and to what extent do you have does the administration, the president have a plan that sees into the future and it says we're going to do a b. c. and d., and those things will bring us out of this? and is it written, can we see at? >> center, first of all, -- senator, first of all it was concerned about the failure of unemployment to decline that motivated us back in august and september to adopt more monetary accommodation. in my view is we've already had some benefits from that.
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we have seen some improvements in the outlook. we've seen some improvements in the financial markets. that is part of what we're trying to do is try to keep this recovery going. in addition of course we are working very hard and our role as a regular to try to improve the availability of credit to small businesses and to other borrowers. senator warner i know is interested in that issue. we are working very hard. that's our top priority. >> well, we've got a changeover in the white house. mr. summers is gone. peter orszag left. we've got a new chief of staff. i hear today. but i don't sense anywhere in our government that we have the kind of clarity of leadership we had under mr. volcker, when we had a crisis in the late '70s and early '80s your one of the fed members said we knew we were
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doing the right thing. they were protesting mr. volcker. some called for his resignation. we had a plan and we were staying with it. the american people have confidence that you and the administration on the same page. we have a plan other than reacting ever -- every month or two to some new changing condition. >> the federal reserve is independent of the administration. we tried to coordinate with the administration, tried to courtney with congress. the federal reserve is independent. so the administrations plan and the congress this plan, those are not our province. that's what the administration and congress to decide. in our case we do have a plan, and i have tremendous respect for chairman volcker. one of the things he did as you say is he did what he thought was right even though there is a lot of criticism. i think that's the importance of independent monetary policy is
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eric at the federal reserve we recognize that there are different views, but we are trying to do the best thing we can for the american economy. that's the beauty of having an independent central bank's. thank you much. mr. volcker, history records i think was correct in his plan. i hope history will record the same for your leadership. >> thanks, senator sessions. let me just indicate that on our side, senator wyden, senator manchin, senator stabenow, senator merkley. republican cited senator enzi, senator corker. senator wyden. >> thank you, mr. chairman. i too want to welcome the senator sessions as our ranking minority member. he is someone i greatly enjoyed working with, respect very much. i do want to note for the record that i don't believe the auburn tigers have a realistic chance of keeping up with the
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university of oregon's fast-moving, innovative offense in the championship game at but we will say that for another discussion. i just want to welcome my good friend. >> you're correct in that i would be pleased to wear that tie you have on, for a few days perhaps. >> we have an agreement and i will reciprocate. senator conrad, thank you very much. thank you we are so glad to have you here. and i especially, because you and i share similar views, this big idea for economic growth in our country is fundamental tax reform, where you go in there and clean out this job killing, thoroughly discredited mess. and you address that i thought very well on 60 minutes discussion that you had back in december. here's my first question. it was clear at the end of the
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year that you had to take some steps with respect to the tax code in the short term. so that people wouldn't be clobbered at the beginning of the year, the middle-class folks, small businesses and others. but what i'm concerned about is when you look at the overall structure of what was done in december, it's contributed once again to tax uncertainty. all of the two-year provisions, the one year provisions, phase ends, phaseouts. as you know, the tax code has tripled in just the number of words in the last decade, and that has been fueled once again by what was done in december. i want to make sure for the record is clear, that when you're talking about long-term economic growth, you want a different tax model than what
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the congress passed in december. you don't want to see more provisions, you know, added, and more exemptions, reductions. you think by and large we ought to be draining the swamp, cleaning out a lot of the clutter, hold down some rates, keep and provide. you want a different model than what was passed in the sender for the long-term -- in december for the long-term. is that correct? >> yes. that was understandable. but i hope that the congress will think hard about what long run tax structure will be most beneficial in lowering rates and closing the holes as i think the best approach. >> the second question, there has been considerable discussion in the last few days, really the last week or so, about the idea of instead of the kind of tax
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reform you and i want, comprehensive reform, just going out and changing the corporate tax rate, i think that would be a big mistake. the reason why is that most businesses in america, probably in the vicinity of 8%, pay taxes essentially of individuals. subchapter s., sole proprietors, partnerships, a whole host of firms who aren't in effect see corporations. isn't there a real danger if you go in and just make changes on the corporate side to have further distortions, further complications, and end up with yet more uncertainty than you would have if you went in and made a comprehensive overhaul, recognizing the connection
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between the individual provision of code in the business provision? >> as you know better than me or anyone, there are many interactions between the two coats including for example, the double taxation of dividends and many other issues. .. portions
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of the code to just split one as some have been discussing i think could once again create a whole set of additional distortions in the american economy. and i appreciate what you're saying, mr. chairman. one other points with respect to tax reform that i think that you have touched on a past but it would be important to have on the record. today it's very clear that people loathe the internal revenue system. i mean, it is just up there at the top of all of the federal agencies and functions of federal government. people are furious about. it seems to me if you got to the point where you had a one-page 1040 form, senator greg and i have that in our bill, as you know, chairman volcker has all but proposed that -- it was in the bush proposal for pete's
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sakes. you know, years and years ago, wouldn't having a one-page 1040 form where most people could complete taxes themselves, other than spending their whole spring on turbo tax and the like, wouldn't that in and of itself be a public good in terms of simplicity and understanding and making people feel more confident that the american economy and the underpinning of the american economy were sound? >> well, as a general matter, simplicity besides being more -- less likely to be distortionary has compliance of lower compliance costs which are quite significant and less need for the irs and for accountants to adjudicate complex provisions in the code. so certainly simplicity is to be desired, and i think it would -- it would make people more comfortable with the tax code
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because it would be less of a burden and because they would feel more comfortable that there weren't all kinds of loopholes that other people were taking advantage of. >> one more question not from an economic standpoint but looking back over the last quarter century on this is that a mistake in '86 was to know have some provisions to make it tougher to unravel fundamental tax reform when you got -- in other words, over the last 25 years after it was enacted, pretty much a few weeks later, the ink was dry on the bill and everybody went back to normal as usual. from an economic standpoint how useful would it be when the tax code is overhauled this time so there's more fairness for the middle class and take these steps to be globally competitive? how important from an economic standpoint is it to make it
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tougher to unravel it as soon as you get to reform? >> well, senator, as you say there are political and probably constitutional issues probably involved but everything else being equal, greater clarity and certainty is obviously beneficial. and to the extent that you can create more certainty about whether the tax code is going to be over a number of years, that would be helpful. >> mr. chairman, thank you. and i look forward to following up with you on these matters. and the fact that you've been outspoken on this has really given a boost to reformers. and we are very appreciative. thank you, mr. chairman. >> thank you. senator enzi? >> thank you, mr. chairman and let me follow on what the senator said. our nation's fiscal policy is in at that timers. our projected level of federal spending growth is unsustainable. our tax code is a mess. the only constant is that the federal budget deficit is large and likely to remain that way. to what extent does the uncertainty that comes with
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these problems undermine the economic growth? >> it's hard to make a quantative judgment, senator, but i'm sure it's a negative. i do think that addressing our long-term structural budget deficits would not only reduce the risks we face in the future but we probably will have near term benefits in terms of possibly of lower interest rates but also in terms of greater confidence and certainty. as you say, as it stands, the one thing we know about are long-term tax and spending commitments is that they're not feasible. they can't happen. they're not sustainable. so we don't know -- how things are going to change. so, yes, the more clarity we can achieve, the better off we'll be. >> thank you. i was cosponsor of the conrad-gregg deficit bill and was pleased that we got one one way or the other and that sheds
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light on what needs to be done by congress. i'm really concerned about the rapidly rising debt to gdp ratios. i've been watching over what's been happening in europe. they've enacted some programs to rein in government spending. so they didn't act enough quickly and had to be bailed out by their neighbors. during the hearing before the house budget in june, representative henserling was asking you whether the united states was nearing a similar point given our comparable debt to gdp ratio and you responded that you don't exactly have know how much breathing space we have. rather than enact austerity cuts as the europeans have done, we've seen our gross national debt increase almost a trillion dollars since june. can you give us any kind of occasion how much breathing room we do have if we continue on this course before we reach that tipping point? anything more exact since june? >> you know, i just think it's
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inherently impossible to pinpoint the exact date or the exact level of debt that would create a crisis or a sharp increase in interest rates. that being said, it would be the better part of valor to take action now to make sure that we don't -- we don't get too close to that point. i don't know what the number is, but i what do know and the cbo's projection shows this very clearly that absent any action, the debt to gdp ratio is going to be not only rising but rising at an increasing pace. it will be heading straight to heaven basically. and that's certainly not going to happen. that certainly -- that can't occur. so i don't know what point exactly but that point will come if we don't take appropriate habitation >> i also appreciate your meeting with some other groups, senator warner and chambliss started a group to review these things. and i appreciated your comments about the difference between our debt to gdp ratio and the
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japanese one where they have a lot of savings and we don't. just so many things that need to be taken into consideration. i know the fed took quantative easing because of the fear of deflation yet other than housing prices americans are experiencing inflation in virtually every other major household outlay, i believe it when it comes to groceries and gasoline. america's economy runs to a large degree on motor fuel. some analysts predict gasoline prices are reach $4 a gallon this summer. won't this risk choking off the economic recovery? >> well, first, just the facts are that inflation is 1% including food and fuel and taking into accounting everything buy is quite low. now it's true people are he sensitive to the price of gasoline and we're watching that
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very carefully. i don't think that quality tatetive easing monetary policy is the main reason that oil prices are up in the last few months. the dollar after all has been quite stable and oil prices are up in essentially all currencies. i think the main reason oil prices is up. the demand for energy from china and other fast-growing emerging market economies. that being said, we're watching it very carefully because as you point out, higher gas prices are like a tax on families. and if they get too high, then that will, in fact, be a negative for growth as well as for inflation. we'll pay very close attention to both energy prices and other commodity prices as well. >> there is discussion among policymakers about removing the federal reserves dual mandate of a stable monetary policy and full employment. some have suggested that it makes sense to remove your
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mandate for full employment so that you can focus only on monetary policy. do you have an opinion about this matter? >> senator, we're not seeking any change. we think the current mandate is workable. that being said, i think it's entirely appropriate for the senate and the congress to consider what mandate they want to set. they are after all central banks around the world that do focuses around the world on price stability and whatever the decision congress makes, of course, we will honor that decision and pursue that mandate. >> thank you. i don't have any further questions. >> thank you so much, senator enzi. senator warner? >> thank you, mr. chairman. and i thank you for holding this hearing this morning. chairman bernanke, let me first of all acknowledge what my colleague senator enzi has already said and thank you for being willing to meet with a growing bipartisan group of
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senators, senator chambliss and i have been working along with senator wyden and others saying we need move forward on a real plan. and compliments to senator conrad and gregg and others. and while imperfect and i particularly appreciate your comments and your testimony about the president's national commission on fiscal responsibility and reform, that we ought to go ahead and take that work product of the last year and use that as a starting point because i think it's both you and senator sessions have said in your testimonies that simply talking about deficit reduction doesn't get us any place. we got to have a real plan to work against. and it is the intention of senator chambliss and i to take that work and put it into legislative language.
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and introduce it. and i think again a point that both senator conrad and senator wyden have made is that if we are going to take on this issue, it is going to require dramatic cuts in government spending but it is also going to require meaningful tax reform and i think again a lot of the earlier attention on the commission's work focused on the deficit reduction piece. it did not focus as much on the tax reform piece which both lowered corporate rates and individual rates actually add on the individual side led more progressivity and i think it's a good working document and i look forward to working with colleagues on both sides of the aisle to see if we can get as many cosponsors as possible to at least move forward on this discussion and it is my hope that we could actually see a plan put forward this year working off of the president's commission as i'm sure it will be amended.
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and actually get it voted on. because the way i hear you say -- now, i can -- you would never be as impolite as to use these terms so let me use these terms. but you're basically saying to us, the congress and the policymakers, we've got to walk and chew gum at the same time so that we've got to continue to do short-term stimulus, you at the fed have done that through your quantative easing policies and we in certain tax policies that were taken in december. both in terms of short-term stimulus but that short-term stimulus then has to be morphed into long-term deficit reduction. going back to some of chairman conrad's earlier questions, you know, what should we look at as
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the metric or other indicators of when we should kind of ease off on the stimulus and ramp up the deficit reduction piece? should that be based on a timeline? i think the president's commission, chairman conrad, you had a lot of your actions starting to click in about 2012, 2013, 2014. should it be on a kind of "dateline" process? should it be based on when growth hits at a certain level, unemployment falls to a certain level? what should be the indicators that even if we get a plan in place, that would trigger the kind of hard choices around deficit reduction that we're looking at? >> senator, first let me say that i enjoyed meeting with your group. you and senator chambliss and i commend you for the extra work you're doing on this issue.
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i think there's an important tradeoff. we need to -- we, the american people, the congress needs to demonstrate a credible commitment to solving the long-term fiscal problems. the stronger and more credible the plan is that is put forward the less need there'll be to take short-term cuts in order to show your seriousness so a strong long-term plan that kicks in over a period of time will make it less necessary to take actions in the short term that would be counterproductive from the point of view of recovery. so that's why it's so important to be -- to develop a strong plan. so that's the tradeoff. the stronger the plan, the less near term down payment you have to make. >> and can i just interrupt for a second. and based upon your testimony today, by referencing the
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national commission on fiscal responsibility and reform, by referencing that effort, is that an endorsement that that would be viewed in your mind as a strong plan? >> yes. and, for example, it has the feature that i believe that by 2015, there's a stabilization -- the debt to gdp ratio which requires, i think, about a 2 to 3 percentage point of gdp cut in the deficit starting in a couple of years through the rest of the decade. in terms of criteria, i think there's no magic number but what we need to see is a sense of momentum. a sense that there's enough forward movement and strength in the recovery that we can feel confident that it will continue and will not be knocked off-course by two precipitous retrenchment. >> i know you don't want to give me a set indicator, but should
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that -- should those indicators be time, growth rate, unemployment rate, combination of all of those -- what should be our markers if we pass this plan, whether the commission's plan or a like-kind serious plan there's got to be some markers when we shift course from stimulative activities to serious deficit reduction? >> all those factors matter but i think a sustained growth rate above sort of the long-term average would be an indication that the recovery is proceeding and has some momentum. but again, the stronger and more credible the forward-looking plan, the less need there'll be to make short short-term adjustments that might risk the recovery. >> let me in my last moment
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follow up on senator enzi's comments. and i think he was looking for a percentage on when the markets will say no mas in terms of our debt to gdp ratio. i guess my feeling is it's not a question of if we are going to do deficit reduction. it's going to happen. it's really only a question of when. and whether we're going to do this on our timetable in a way that is not disruptive to the economy. or whether it is going to be dictated by the markets in terms of their lack of faith in our ability to service our debt over the long term. and so what i guess i would ask you and i know my time has expired, mr. chairman, this will be my last question. you know, we can't predict that
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to a specific percentage or date certain. but what would be -- or what could be some of the warning signs that we're getting close to that precipice. could it not be some external international, god forbid, terrorist incident that might put a shock wave across the economy? could it not be another economy in europe getting close to a failing point in an economy that would be larger than, say, ireland or greece? what are some of those warning signals? and would you also say that -- if we start going down this precipice it could happen very quickly once we get to that unforeseen point? >> so in terms of market signals, i think i would look at things like government financing interest rates, long-term bond yields, the dollar. indicators of confidence in the united states. i think it's important to
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understand, if i may, that nobody doubts the united states has the economic capacity to pay its bills. it's really a question, do we have the political will to do that? and demonstration of the political will, that's what the markets are watching. is the congress and the public and the administration -- are they able to demonstrate that they are serious and that they have enough willingness to work together to make progress? at the point where confidence is lost in that, you could see a relatively quick deterioration in financial conditions as we saw in some cases in europe. where things change very quickly based on the change in sentiment about the prospects for those economies. >> thank you, mr. chairman. i look forward to working with you and senator sessions and all our colleagues in making sure we don't get to that point. >> we appreciate the effort that you've mounted along with senator chambliss. i just for the record want to
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point out that the proposal was stable the debt down in 2014 and starts bringing it on a sharp path after that. senator manchin? >>from my state of west virginia i'm concerned about my state and all the states for the nga. what i would like to know about the future pension liabilities of both corporate and state governments, the recent reports of the financial crisis that many of our states are facing in the very near term future, have you all looked carefully at the possibility of a default on general obligation and municipal bonds by state and local governments and the budget strains that would present to the overall u.s. economy? if we're concerned about the stimulus runs out, june of this
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year, what happens? and if there's no more stimulus to come, and a federal buildout if you will and they have to work on a balanced budget amendment and they can't meet these long-term obligations, have you all looked into that or been spending any time on it? >> to some extent, senator, yes. no question state and local governments are under a lot of pressure. they've been cutting spending and employment over the last couple of years. the federal assistance will continue in 2011 but after 2011 it's going to be pretty much zeroed out, i think, and so on the one hand, states are seeing some improvement in tax revenues as there has been some growth. on the other hand, they are going to be losing some of their federal assistance so that the pressure is on state budgets and local municipal budgets are going to continue for a while and that will be a head wind for the overall economy as well as
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for the individual states. it's also true -- this is more a long-run issue that like the federal government, the state and local governments have some long-term fiscal issues relating primarily both to pensions of state employees but also to health care promises which in most cases are almost entirely unfunded. so those are long-term obligations that could be as much as collectively as much as $2 trillion for all the states together in the long run. now those long run obligations don't come in the near term some very serious long-term pressures. in terms of the municipal bond market, it currently seems to be functioning reasonably well. liquidity is fine. issuance has been very high including issuance of capital projects. so we're not seeing extraordinary stress in the municipal markets which means investors are still reasonably
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confident that there won't be defaults on major borrowers and the reason they believe that is most states have rules which put debt repayment and interest repayment at a very high priority above the locations of the state and local locality. bottom line, the municipal markets, bond markets seems to be doing okay but clearly there's a lot of both near-term and long-term pressure on these governments and it's going to be something that's not going to be going away in the near term. >> another question i have, is that in west virginia, when families have problems whether it's families of single parents, they don't -- they can't really respond and kind of understand what we do here in washington or what government does. they don't sit down and think how much more money can they spend or how much money can they borrow to get themselves out of trouble. they start looking at cutting expenses. what expenses could the federal
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government cut that would have the longest -- or have the most effect on long-term stability in your recommendation? what should we be cutting? >> well, senator, i should just say first very strongly that these tough decisions about taxes versus spending and the mix of spending are not mine. and i don't want to inject myself too much but i will say one thing which is just obvious from the arithmetic, which is that going forward, the costs of health-related programs, medicare and medicaid are rising prospectively very quickly. and on current trends, it's, you know, would be at some point between medicare and medicaid and the social security would essentially be what is now the entire budget of the united states. so i do think an important priority for us as a country and
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for the congress from a fiscal point of view is to think about what we can do it to achieve better cost efficiency in the health care area at the same time that we do all we can to maintain quality and access. so that's clearly an area we need to look at. that being said, of course, we have military spending, other discretionary spending. we have the tax code the many other things that you will certainly want to look at. >> i know there have been some members of congress who have long advocated for a federal audit on the federal reserve system. would you oppose an independent audit of the federal reserve system? >> the dodd-frank act included an amendment sponsored by senator sanders and others that includes an exhaustive audit of all the financial aspects of the federal reserve. in fact, on december 1st it will be released all the lending
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programs, financial programs, credit programs that we undertook during the crisis so as far as our finances are concerned, we are an open book. and if there's any area where you or your colleagues are dissatisfied with the information, i'd be happy to work with you to make sure you get what you need. so in terms of all aspects of our finances and operations, i think it's reasonable for congress to want to have that information. the one area where i have been concerned and this goes back to my earlier comment to senator sessions is that monetary policy independence is very important for the stability of our economy and our financial markets. and where fed audit is really a code for congressional intervention in monetary policy decisions, that is where i would be much less comfortable. >> and finally, is there -- is the federal reserve considering any policy changes that would negatively impact the financial viability of local community banks around the country?
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>> to the contrary. we are -- have a strong commitment to community banks. and we have, in fact, recently increased our schedule of direct meetings with the board with representatives of community banks. there's obviously a lot of work to be done to implement dodd-frank and basil iii and other regulation. it's our objective -- i think the intent of both basil iii and the dodd-frank act is to focus on the largest so-called too big to fail banks and to make them too big to fail. that's where our focus is as well that not increase the regulatory burden that small banks play. and small planks bay an incredibly important role as large banks have cut down our that lending and they have in many cases stepped up and proven their worth to the u.s. economy.
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>> thank you, sir. >> thank you, senator. senator stabenow? >> well, thank you, mr. chairman. and welcome, mr. chairman. mr. chairman, thank you for your thoughtfulness and i think what you laid out to us both in terms of where we have come from, and what we've done and where we need to go, i think, is very, very important. i feel as a member of this committee now for many, many years, though, that i have a need to make sure that we don't have a revisionist history whenever we're talking about how we got here. i think it's really important if we're not going to -- if we're not going to repeat mistakes that have been made before that got us here, i think it is important to just say once again for the record that when i had the opportunity to come in and serve with you, mr. chairman, the committee members in 2001, we had the biggest surpluses in history of the country. and so we've not always been in this situation and there were a number of decisions made on
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spending, frankly, without accountability that have gotten where we are. and i would argue that, unfortunately, the spending was -- in the eight years in the previous administration was not focused on those things that create innovation, to create jobs, to compete in the global economy or focus on opportunity or security for middle class families. instead, it was very much focused on the benefit to a privileged few. and at the time in the last administration we were told deficits didn't matter when we were focusing things that would benefit the privileged few. now after two very, very tough years, very tough years, very slow years, we're turning it around. we've not gotten things back on track. people in michigan are still hurting although it's better but we've got to go a long way to go. my concern is that we're now
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hearing with the new majority in the house that again deficits only matter when it's things that affect middle class families in terms of opportunity, education, innovation. but that when it comes to the policies that got us in this mess, of focusing on tax cuts for the privileged few, supply-side economics, hoping they'll trickle down, that doesn't count. and so we saw this week over a trillion dollars exempted from the budget rules. that will add over a trillion dollars in debt if we go forward with that. based on a way of looking at the economy that frankly didn't work and it got us in the last decade in my judgment into the hole that we're in. mr. chairman, i want to ask you about how we get that out of this hole, both short term and long term. and i agree we need a credible plan. and i very strongly share your
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view we have to be very careful in the short run. it's a very fragile situation. and i don't frankly see how we get out of this, with over 15 million people out of work. i mean, i don't know -- how do we get out of deficit? if we don't first focus on jobs? one of the things that i'm proudest of is the fact that we didn't give up on american manufacturing two years ago. we didn't give up on the american automobile industry. and this year for the first time since 1999, all three companies are making a profit. they're actually bringing jobs back to this country. and because of our investments and innovation, we are going to go from 2% of the world's battery manufacturing advanced battery to 40%. in the next 40 years. but my question, mr. chairman, relates to the immediate
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situation for families that are not yet feeling this recovery. and the fact that we have tens of millions of people who are out of work. and frankly when we talk about 2008 budget numbers, i'd like to go back to 2008 jobs numbers and focus on that to get us out of deficit. but how would you focus on job creation in the short run knowing that we have serious long-term issues that have to be addressed on the deficit, but at the same time, i guess i would like your reaction to the notion that we will not get out of debt if we have over 15 million americans out of work. >> senator, the -- you're absolutely right. that a large part of the deficit we currently have is what economists call a cyclical deficit. it rises because where unemployment is well above a normal level. and we need to address -- what we need to address is the
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structural component, the part that remains once the economy is back to a more normal level. again, i think that we need to think of fiscal policy as of a piece. that is we can't think of short run or long run separately. you've got to think about them together. and the more credible and effective our plans are for addressing the long-term structural issues, structural deficits, the more scope we'll have and more flexibility we'll have to allow continued support for the recovery that we need now that the economy remains in a very still weakened and fridge fragile condition. so my advice for what it's worth is again not to focus only in the short term but also think of the long term to combine those two things.
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you mentioned things like innovation. again, as i talked about in my testimony, the composition and structure of government spending and tax code and so on is also very important. are we doing enough for innovation? you know, we spent quite a bit of money on that. is it well directed. is it sufficient to keep our leadership position, you know, going forward? so those would be the themes i would note. long term structural deficits that need to be addressed and in doing so would help the short term would give us more flexibility in the short term and think hard what we need to think of longer term growth innovation to help people get better jobs and sustain higher incomes. so it's a tough set of problems and they are very much interconnected. >> well, i very much appreciate
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your comments and share your feeling that it is about bounds. it is putting in place the long-term plan but also understanding in a global economy we're in transition now as a country. that it's very, very important that we be investing in those things, opportunity, education, innovation that allow us to move forward in terms of growing the economy. quickly before my time runs out, just one quick question to follow up on small businesses. we passed the small business jobs bill. we've talked about the importance of supporting community banks. i would just ask you, on one hand, we are saying to banks, lend more. regulators are saying, don't lend essentially or tighten up things. it's critical, i think, that other regulators help banks, community banks, take full advantage of the lending initiatives that we've placed into the small business jobs bill and i wonder what actions the federal reserve is doing or can do to help small business?
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>> senator, as it happens i'm going to be on a panel sponsored by the fdic. i think it's next week with sheila baird and senator warner where we'll be talking about small business credit and talking about all the initiative its that the congress has done, the federal reserve has done and the other banking agencies have done. but just very briefly, we are very attuned to the need to have an appropriate balance. on the one hand we don't want banks making bad loans. that's how we got in trouble in the first place but on the other hand, credit-worthy borrowers need to have access to credit so that they can hire and they can expand and they can help the economy recover. and so we've been working very hard with the banks and with our examiners to try to get a balanced approach. and i think it's beginning to pay off. there is some improvement, in my view, in the availability of credit and i expect to see more lending this year. so there is -- the terms and standards have begun to ease a
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bit. so i think there's some progress on that side. we've also -- and i won't take too much of your time but we have also undertaken a series of meetings around the country, more than 40 meetings, where we've met with small businesses, lenders, examiners, local officials, trade associations and the like and tried to identify technical problems and other issues that have blocked access to credit. and we found some very useful things and we're working -- we're moving forward on those, on the things we learned. >> thank you. thank you, mr. chairman. >> thank you very much, senator stabenow. senator cornyn is recognized for 30 seconds. >> mr. chairman, i can't clear my throat in 30 seconds. [laughter] >> we're doing -- seriously, we're doing 8-minute rounds. >> thank you. >> mr. chairman, thank you very much for your service in what is by all accounts a very challenging job but, of course, we're all volunteers here. and no one is holding a gun to our head and making us do these
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jobs. we volunteer to do them because we think we can contribute to doing things that are in the best interest of the country. and i appreciate very much your service in an admittedly very challenging job. it strikes me that there are three events coming up which will really provide an opportunity for congress and the administration to demonstrate its seriousness at dealing with the run-away spending and the unsustainable debt problem that we have. one is the president's budget is going to be due the first monday in february. that will be, i think, one of the first indications perhaps of the president's response to the report of the fiscal commission. and i want to congratulate all of our colleagues who participated on that on a bipartisan basis who i think demonstrated great courage in voting for a plan albeit one that we all could find some differences with, but again, the
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time for talk is running out and now it's time for action. >> so the first -- it strikes me the first event that will provide the president an opportunity to respond to that in a meaningful way to set out his budget for the next fiscal year will be the first monday in february or here it may slip by a week or so. the second it strikes me as the debt ceiling vote that's going to be coming up. and there's been a lot of talk and speculation about what might happen, whether there'll be some additional conditions that would be imposed as a -- on voting to extend the debt ceiling, which is obviously a very sensitive and important issue. and then it strikes me that the third sort of watershed that's coming up here that will demonstrate our collective seriousness of dealing with this particularly from a fiscal policy standpoint will be the expiration of a continuing resolution. but i want to ask you specifically about something
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that senator manchin alluded to briefly on in terms of not just the federal government's problems dealing with its debt but the states and municipalities. and the analyst who correctly saw the mortgage crisis in 2008 now predicts that 50 to 100 sizeable u.s. cities could default in 2011. she said this could cause hundreds of billions of dollars of municipal bond defaults and warns that next to housing, this is the single most important issue in the united states and certainly the biggest threat to the u.s. economy. and i would note, obviously, many states are in deep fiscal trouble also. and there's the potential -- at least the potential maybe not the probability at least imminently but at least the potential we could see some defaults at the state level.
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i heard what you said about the mortgage -- the municipal bond market not showing any imminent signs of crisis. but do you agree that this is a very serious issue that needs to be confronted? >> sorry, senator. i don't have a -- i don't have a forecast about default risk. i think that sounds like a somewhat pessimistic view but something we need to pay close attention to. clearly, a lot of cities are under -- certainly no one can question they are under a lot of financial stress. and it's something we need to pay attention to because it would have some spillover effects into other markets. we don't at this point see anything of that magnitude happening. that being said, i think cities and localities will need to take
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strong measures to avoid default. default is only at best a short-term solution for local governments because what they find is that it would be very difficult to get back into the market or if they do, they'll have to pay a higher interest rate. so they would obviously be much in their interest to take the difficult measures to avoid default. so again, as i said earlier, while there's no question there's a lot of stress at state and local governments at this point the municipal market seems to be operating fairly normally but we'll watch that very carefully. >> that's fair enough. let me sort of drill down a little bit because i want to get -- this is a point i want to get to in particular. in 2002, you gave a speech before the national economist club in washington. and you said, quote, and i think this is a fair quote, tell me if it's not -- quote, the fed has the authority to buy foreign
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government debt as well as domestic government debt. and we know that under the qe2 plan that you are implementing at the fed you are buying u.s. government bonds. but would that extend to state and local debt, that authority? >> only in a very, very limited way. so first of all, we have no intention of buying foreign debt. that's really a provision to allow us to hold foreign exchange reserves and we're not planning any policy in that direction. >> my answer is obviously really on the state -- >> on the state and local, we have very limited authority there. we do have the authority to buy very short-term municipal debt that is -- within certain categories. so we have very limited ability to buy state, local municipal debt and moreover, the dodd-frank legislation restricts our ability additionally not to
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lend to any insolvent borrower and not to lend to an individual borrower but only in terms of a broad program. so we have no expectation or intention to get involved in state and local finance. i think to the extent that there's anyone to look at that, it would have to be congress to look at that. >> well, i don't have to tell you how a request for a bailout for a state or a municipality would be received here in washington. so let me ask you, under chapter 9 of the bankruptcy code, a municipality could go through a bankruptcy proceeding. but right now there is no provision in the bankruptcy code as i understand for a state to go through a bankruptcy-like proceeding, a chapter 11 where, of course, the secured
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creditors, the bond-hordes and others would maintain the highest priority. but there would be a procedure by which the state could wind its way out of this crisis situation and get back onto a more sound fiscal basis. there's been some suggestion among commentators, others, that congress ought to look at a procedure that would allow that to happen as one alternative. would you think that would be a wise or a good thing for congress to do? >> i think it would be useful for congress to look at the situation broadly and try to identify what potential problems that might be there and what there might be in the bankruptcy law, et cetera. i think it would be very -- it would be extraordinarily unusual for a state to default.
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it hasn't really happened seriously for 160 years or so. and i think we ought to focus on states meeting their obligations which they do have the tools to do. and again, as i mentioned before, in most states, the debt and interest payments are the top priority and they would come in front of provision of services and so on. so i think we should understand the situation. but i'm very, very hopeful and expect that we'll be able to avoid defaults of that level. >> and i share that hope but if i may conclude on this question, what would be the consequence of a large state like california or illinois defaulting on its debt? in terms of the national economy? >> well, it would -- it's difficult to know frankly because it hasn't happened for a long time. it would certainly be -- it would certainly create a lot of stress and volatility in the markets. there's no question about that.
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it also would mean that the state, when it came back into the market, would probably have to pay a much higher interest rate for a considerable period and, therefore, it would be, i think, a very much last resort for any state to do that. >> i thank you very much. thank you, mr. chairman. >> i thank the senator. i thank the senator for asking the question because i think this is something we need to be paying close attention to. senators raised the question of a series of municipalities that may be under significant stress. we've also been told that there are a number of states -- i've been told as many as 20. governor manchin, maybe you have more recent information. >> i just cycled being out of the chair of the nga and we were concerned watching the fiscal viability watching everyone in the states. everything is back to 2008 levels is what we were based off and that's what you based off in congress when you set up the help that was given as far as in
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the aid to the states. that all goes away by june 30th. most of our fiscal budgets are done june 30th, 2011. >> and do you have a rough idea of how many states are -- >> i think it's upwards in the high 20s, low 30s that could be in serious problems. we're concerned. we're very much concerned. >> we've got an analysis by the way underway on this question. this may be one of the things we would like to talk to you about if you have an opportunity to come up and meet with us in a session with all senators. we do have an effort underway based on the conversation i had with governor manchin earlier. >> if i could ask one question mr. chairman, and to mr. bernanke, i think what we were asking and the senator from texas is asking the same. is there any plan -- i know it hasn't happened -- we're seeing indications and concerns and states have done everything humanly possible because they have to meet a balanced budget, you know, every year and they
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cut to the bone if you will. and if the cash flow is just not there, with the amount of services they have to give out, is there any bailout or any other proposal that you all have and have been looking at and i think that's what we're saying. is there any plan that's available that could help a state to prevent this from happening and falling into default or could you do that? >> i don't think the federal reserve has the authority. and i don't think it would be appropriate for us to do that. this is something that would take place over a period of time. it wouldn't happen in a day or two. and there would be plenty of time, i think, for congress and for the state legislature to, you know, look at alternative solutions. i think this is really a political fiscal issue. and we'll watch it very carefully because it has implications for the economy and for financial markets but i don't think the fed really has much that we can do about it. >> mr. chairman, i would recommend that maybe as a committee what we should do is check with the nga. they'll give you complete status of what they see and the real
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crisis. >> i think we better -- we better think about how we get input on this. you know, the more we look and senator cornyn has brought to our attention here -- what we heard earlier is the result of the information you shared with us. that this is something that's out there on the horizon that we need to pay very close attention to. senator merkley, we apologize to you because we interceded on your time. we'll give you an additional minute. and you're recognized. >> thank you very much, mr. chair. i'll use a few seconds of that to say senator sessions, i'm happy to hear that you're will to wear senator wyden's tie if oregon wins. i have a pin right here that maybe you would be willing to wear this pin if oregon wins for a couple days. >> i would be glad to but i'm not going to lose over sleep. [laughter]
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>> will you be out there on sunday? >> having our auburn team and come in tuscaloosa and coming out victorious, i'm a little confident. it's exciting and it's so much fun and people are so excited. i'm sure they are in oregon. and it's just one of the great things about america. that people can pick out something other than politics and have some fun with. >> absolutely. a little bit of an anecdote. well, let me turn to the business at hand and thank you very much for your testimony, mr. chairman. i wanted to start by asking a little bit around the qe2 policy. as i understand it, you could summarize it by saying that in buying these bonds, you are injecting more money into the economy. doing so reduces the interest that would be bourne on those
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bonds that would encourages more people to hold less of those bonds and invest more in either corporate bonds or perhaps stocks and there was a constitution effect to invest in american business. so that's kind of one category. another category would be that in doing this, one also creates more pressure in terms of those economies such as trying to switch our our pegged exchange rate with the united states to try to reduce the impact of china's currency manipulation on our ability to sell our products abroad. do you see both of those as key components or one more important than the other or that helps us get our hands around these two pieces. >> first of all, i would say the federal reserve is neutral on the auburn-oregon issue. [laughter] >> i'm disappointed to hear that because there's two senators from oregon here and only one
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from alabama. [laughter] >> senator, your first part of your description, i think, was very accurate. that we are trying to ease financial conditions to stimulate more economic activity. you know, defacto, this policy has been in effect since august. because in august we began to reinvest our securities and i began to talk about this in public and the markets began to anticipate these actions. and we've seen since august significant improvements in stock prices, in spreads, in volatility and a variety of areas. and i think we are having some positive benefits on financial conditions. and are contributing to a better outlook for the economy. it's not our intention to do anything particular on the internet front. our objectives are focused entirely on the u.s. economy,
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which is what our mandate tell us to do. it is true that to the extent that china or other countries undervalue their exchange rate or maintain a fixed exchange rate, they import u.s. monetary policy which is appropriate for the united states. it is not i believe it appropriate for china given how quickly they're growth and the fact they are dealing with some inflation issues. so in fact it is forcing them to take some actions, letting their exchange rate appreciate somewhat would be helpful for them in this context because it would reduce the inflation pressures that they're otherwise going to experience. but that's -- but that's not the -- you know, that's not the key objective of the policy. the policy's objective is to try to meet our price stability and our employment goals. >> i understand that. but the employment goals also are impacted by the ability of us to sell our products overseas so there's kind of a complete picture that comes to play in
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that. and in that regard, let me turn then to manufacturing because one of the -- one of the challenges certainly for american products making them here and selling them abroad is the difference in labor rates. but there's also been the argument that in our trade agreements we sometimes end up in a situation where foreign producers seem to have full access to american economy while both through currency manipulation and through nontariff barriers, american products don't seem to be able to get into the foreign markets as easily. and that differential has undermined manufacturing in america. there's also been a related conversation -- i just wanted to lay it out because i see it starting to appear here and there. and that is that one of the reasons we seem to be coming out on the short end of these trade agreements is because we also go
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into these negotiations with other goals that are not necessarily economic goals. that is goals related to access, military access, fight ago key ally to, say, as we did with -- in the markets in china when we were involved in the wrestling with the soviet union, we take noneconomic goals into these agreements. and so i thought i'd just see if you'd like to comment a little bit on these challenges in terms of our ability to maintain a manufacturing base and some of the interrelated issues regarding trade negotiations? >> senator, of course, we remain an important manufacturing power. i think we still have the largest manufacturing sector in the world. employment has been declining very sharply because of productivity gains. but you're also correct, i
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think, that trade and currency issues are an important factor. on the currency side, i've been very clear that i believe that the policy of china and other emerging markets to undervalue their currencies is counterproductive both for those countries and international imbalances and for global trade flows and i hope we can continue to work with china and those other countries to create a more flexible exchange rate regime. i think that's very important. i'm not deeply conversant with the details of trade negotiations. i think every country has multiple objectives when they engage in these negotiations. but i hope that we will be aggressive in pursuing wto remedies, et cetera, as needed to eliminate trade barriers in and both tariff barers and nontariff barriers and i like most economists that it works
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both ways, imports as well as exports to free freely. >> thank you. let them turn to another issue which is the impact on the high level foreclosures on house prices in america we had an ongoing rate of about 300,000 foreclosure filings a month. not all of them will result in foreclosures but many will. and we still seem to be driving down the value of homes, which results in more families under water, more families that are in situation where they can't borrow against the house since the house is worth less than what they owe. how does -- how does this -- and i'll just note that our effort to intervene which was highly debated two years ago when i first came here to the senate, a decision to invest 50 to $100
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billion to oregon -- not oregon, but oregon and the united states homeowners has resulted in the expenditure over these two years of less than a billion dollars. i think last i checked was about 500 million. so our intervention has been modest at most. this remains both a huge factor affecting the quality of life for families and their ability to look positively on the future. and how does -- how does this play into our monetary policy or interrelate in ways that we should understand better? >> well, you said it very well. foreclosures continue to be very high. there have been sincere government efforts to try to address the problem but they run into lots of bureaucratic and other difficulties as well as the fact that in a weak friday with lots of unemployment there's a lot of folks for whom there's really no solution, a
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good alternative given the income has been lost through job loss. this is an important consequence -- has important consequences for the macrosituations as i alluded to in my testimony. the high levels of vacancies. homes that are not only empty but are, in fact, reducing the value of the neighbors homes around them. are driving down prices which is affecting household wealth which is affecting consumer spending and confidence. it's affecting the whole residential industry. construction is very, very weak because with prices so low, new construction cannot recover its cost. ..
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>> and it's one of the reasons that the recovery along with the problems in credit markets, one the reasons of the recovery is not as robust as it normally would be given how deep the recession was. >> my time has expired. i do have another question if it's appropriate. [inaudible comment] >> given the fact that we intruded on your time, go ahead. >> thank you. well, one the interesting developments is that families started saving substantial amount which recognizing that they needed to prepare for the possibility of a loss of a job or the drop in value of their
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home and so on and so forth. which, of course, on the spending side, that throws a wrench into the economy. but one thing that i have heard reference to, but i'm not sure if it's right is that the amount of consumer debt has decreased by more than the amount that the national debt has increased. that is if you take the family debt and the national debt together, our total indebtedness has dropped. is that accurate? and does that -- how does that play into the macroeconomic picture in terms of the impact of our national debt? >> that is correct. one way to see that is that our current account deficit, which is our foreign borrowing has gone down. meaning the need for borrowing is lower than it was before the crisis. that's the opposite side of saying that aggregate demand to
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bring the economy to full employment. what you say is exactly right. and again, it is consistent with the need for continued at least speaking from the federal reserves perspective, continued accommodative monetary policy to help support the economy's recovery. >> thank you. >> i thank the senator. let me go to a second round. let's reduce this to four minutes. so we don't impose too much on the chairman's time. let me just say, i've gotten an initial report now in the state's situation and i've asked senator manchin as former head of the national governor's association to get us the latest information that's able from that source. here's what i have an initial review since our conversation on the floor, i think it was last week, governor manchin.
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maybe a week ago or so. in looking at what's happened since enacting their 2011 budgets, 15 states had new budget gaps open by late november. totally $27 billion, nearly the entire gap is accounted for by five states. illinois, half of it, roughly half; arizona about 10%; washington 7%, california roughly 7%; texas 5%. those are the new gaps that opened up in 2011 after they collectively had closed 84 billion of gaps in work on the 2011 budgets. what is, i think, a serious matter is looking at the 2012 budget gaps. ncsl survey, national committee on state legislatures projected a gap of roughly $97 billion in
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2012. the committee on budget reports the gap stands at $113 billion, and is expected to go to $140 billion once all of the states have updated forecasts. so we are talking about a significant problem here. with some 35 states projecting gaps in 2012. only 11 states reporting no budget gaps for 2012. i must say proudly, my state has no budget gap. i think governor manchin left his state in very good shape. i don't think they face a budget gap. but that -- now looking back in 2011, they closed 84 billion of budget gaps. so clearly there is capacity there to do significant budget gap closing looking at 2012. but i mean $140 billion is a big
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number. certainly for those individual states. and i think it is, you know, you look at illinois, for example, they are telling you about a 2012 budget gap of $15 billion which represents 50% of their budget. that is a whopper. and i do think we need to be prepared with a plan in case we are approached by one or more states because clearly the problem is concentrated in a handful of states. as i indicated, five states where the significant majority of the 2011 gaps illinois, arizona, washington, california, and texas. we got to be ready with a plan if we are approached with respect to requests from any or all of those states. and i understand fully that's
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not your -- in your domain, but i think we can responsibly anticipate that we may have requests made to us. and i can tell you i don't think congress, the house or the senate, are going to be very interested in bailouts to states. >> mr. chairman. >> senator manchin, if i may, and just open discussion here. the states are going to be in a situation where they are going to have to have the flexibility to refinance. to put their financial houses in order. everybody bet if we will, they worked out of '08 levels, the amount of stimulus that helped them get through a difficult time. we thought the economy would pick up. it hasn't. they are still story. they are making draconian cuts. we are aware of that.
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our bond ceilings that we have as states that we are able to go out to the market with, there might be some creative finance that's needed to be done here. we're going to be need all of the help that we can get. can they raise those ceilings to see if there's a market to refinance a 0% bonds to go out and find out if they can create values within their states? i don't think the appetite is here in congress. here's more money to help you. can we help you help yourself? give you responsibility? restrictions that we can ease up on. that would be most appreciated. it's not if it was going to happen, it's when they are going to need our assistance and help. >> i think you make a good point. since our previous conversation, i immediately asked people to go out and do this survey. and i think it's something that committee is going to have to be prepared with an answer.
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and what you are saying, i think, makes eminent good sense. that is maybe there are ways of help with creative financing. i don't think going to be much appetite here to send truckloads of money to states. i've about used my time on this four-minute round. other -- senator sessions would you like an additional? >> yeah. i would, mr. chairman. so much to ask you, chairman bernanke, i will submit some written questions to you with regard to the state situation. states are sovereign. they have issue on their own debt, and the people who loan money to states need to know their likelihood of being repaid is based on the financial condition of that state. there's a moral erosion of
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significant nature when we undertake and start bailing out now more. and i just think this whole bailout mentality has far more ramifications than a lot of us think. and a lot of people have indicated. so i understand what you are saying, mr. bernanke, states need to get their house in order. they shouldn't expect lower interest loans from the fed if they get in trouble. is that correct? >> i -- they are not going to -- they should not expect loans from the feds. i think they -- the numbers that the chairman referred to are perspective gaps. obviously, they are a measure of how much spending cuts or tax increases are going to be needed to achieve balance. it's going to be difficult. but on the other hand, there is some improvement in the economy and tax revenues actually have picked up some. so it's a difficult situation. but i hope the states will be
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able to address it. >> i just got to tell you, places like california have been living beyond their means for a very long time. even when the economy was in good shape. and our state is very frugal, we try to operate a good state. i think i'm not inclined to answer my constituents to rescue someone who's been in problems. i'll note with mr. christie is doing in new jersey. agriculture department, reduced 24%. banking, 12; community affairs reduced 35%; education, down 8%; human services, 4%; law and public safety, 7%; roads, 3%. now i suggest new jersey is not going to sink into the ocean. it's still going to be there. and this idea that cuts and even the deficit commission, bless
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your heart, i hope i would have been willing to support the commission's recommendation as about as good as anything that we've seen. it does not call for anything like reduction in federal spending like this. actually doesn't call for any really and discretionary accounts of significant amount. so we can do better. the american people are telling us this. mr. bernanke, i criticize some of you folks, including president bush and mr. greenspan in it. i don't think you realize the political world we live in. the real world that we live in. you think that, well, we can in 2001 when we needed to stimulate the economy and run a deficit, well, we've had a surplus for a few years. we can ask the congress to spend money and then when they get to a certain point, we can tell congress to stop. but those of us who committed and were elected to try to balance the budget and
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participate in tough votes to balance the budget really had our legs chopped off. we weren't able then to warn against spending even the republicans, some of them. and the feds seem to be saying deficits don't matter. and now see how hard it is to turn off the specket? maybe you in the fed can turn it off just like that within your power. for us politically it's not easy. so we got to get a consensus. i think the american people have a sense right now, don't you, mr. chairman, that they want us to do something now. and i want to ask you, are you telling us that you don't -- you think it's premature to start reducing some of our spending levels and some of the government accounts? because it might hurt the economy. the brits don't seem to think so. in a similar situation to ours, they are cutting now. >> what i said, senator, was that it's a long run issue.
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it has to do with, you know, the problems are not just this year or next year. the problems go out decades. and i think it's not too soon to have a strong set of measures that will bring down deficits over time so that we have at some point a stabilized and declining debt to gdp ratio. i think action is needed. but you are not going to solve the problem by just making cuts for this year's budget. you need to think about the whole future path and all of the obligations both -- i mean the chairman talked about the debt held by the public and the gross debt and so on. all of those debt numbers don't include the unfunded obligations that we have for entitlements, for example. so the true debt is probably three or four times bigger than what the chairman is talking about. so we need to address that. but what i'm saying is we want to take -- we should take a long run perspective. that's what the markets are
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looking at and that's what economic stability requires. >> fair enough. i think -- but i do believe we an opportunity to eliminate waste and spending right now. it would not damage the economy and in the long run, we need to work together to try to figure out how to create confidence in our economy as under control and our spends as under control. >> senator white. >> thank you, mr. chairman. chairman bernanke, i want to ask about china in a different way. i also chair the senate finance subcommittee on trade and competitiveness. and i want to take you through what i think is going on with china and get your reaction from the american economy and particularly the cause of creating more good paying jobs. a decade ago when china was admitted to the world trade organization, in effect, there was a commitment made to marketplace principals. that was essentially what their entry to the world trade organization was all about.
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in the last six months, and frankly we've seen this over a considerable period of time, seems to me we have seen considerable back flighting in china with respect to these marketplace principals. in two areas i've been especially concerned about most recently are rare earth minerals which are so important for american, you know, manufacturing, green goods, and others. where the china in effect are saying, look, we are going to keep our railroads and minerals here. and if people in the united states want manufacturing, they got to come there. and we are also seeing it in what amounts to discrimination against american digital goods and services. which is another important area of good paying, you know, jobs for our country. my question to you is what's your sense about the implications of china back
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flighting on these marketplace principals that they in effect, you know, committed to? i'll tell you in my view, they are violating world trade organization principals in those two areas. the question of rare earth, you know, minerals and digital goods. what are the implications of what they are doing there, and what is an appropriate, you know, role that our government ought to be taking? >> well, the wto agreements have specific rules and procedures and we've actually brought some actions under wto. i believe we've won a couple of them. within the rules that china has agreed to, the wto process looks like it's been working. i'm not so sure i would agree that china is backsliding. there's been issues all along with government property and government procurement, and a wide variety of access. >> those two areas most recently. >> yeah. >> and they are very important
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to the american, you know, economy. rare earth minerals and digital goods. this is a pretty new phenomenon. this is the last six months. that's why i am talking about the implications for the economy. >> well, i -- on rare earths, you know, i agree that that's a strategic input. that's a strategic input. i don't believe the united states has any current capacity or very little capacity in that area. we might want to consider some strategic investments in that area. but this is just a number of -- there are a number of areas and the chinese would raise issues with us as well about exports and so on. the technological exports and so on. where i think ongoing engagement is really going to be important. the president of china is going to be here in a few days and i hope that'll be an opportunity for high level discussions. but this is part of the ongoing process that we have with china for a while which is to try to
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hold both sides to trade and investment obligations. and it's been a struggle at many cases. i'm not disagreeing with you. >> i thank you. i clearly come to these trade issues looking for ways to open markets. that's why i think that we're at such a critical time. i have voted for every market opening agreement since i have been, you know, in public life. but i also think it's important to adhere to principals that ensure that in a global market place everybody has an opportunity to make markets work. i think we're seeing in a number of areas considerable back flighting from the chinese. and i look forward to following up with you in this as well. because we cannot -- we cannot meet our target of doubling exports as we have set out to do in this country, and substantially lowering the unemployment rate as our
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constituents are demanding unless we have an opportunity around the world to have fair access to markets and i think in an -- in a growing number of areas, that has not been the case. i look toward to working with you in the days ahead. i thank you for your appearance. mr. chairman. >> thank you. senator manchin. >> just to follow us, in the state of vivers we've been blessed with some of the highest quality of coking in the world. i brought this to attention. we are concerned about most of our assets being purchased by foreign countries. we still have miners mining the coal. but as the senator just mention, most of this product is leaving this country. that's the ingredients of making the still that's needed to build industry, if you will. and i i don't know if we know the critical juncture that we are at. i can tell you i see it every
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day. the amount of money that they are pay for these reserves. with that being said, i know this is being talked about. i'm not new kid in town. the whole bill out in the banking system. in my area, we are very much concerned small businesses don't have access to capital, having a hard time acquiring it, individuals, commercial, developers, building industry. the thing that's really lacking and throwing us back right now is the access to capital. we bailed out wall street, but not main street. when do we see relief or what you do think needs to be done, sir, for us to open up the banking industry so it can start taking some if you will, some calculated risk and putting money back in the market? >> well, just on the narrow question of t.a.r.p., of course, capital went out to smaller firms as well as larger firms. congress just recently passed the small business plan that has
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nont.a.r.p. capital going to small banks that are willing to make loans to businesses. some of it has gone to small firms, as well as large firms. it's a tough problem because you have small businesses who are used to somewhat easier conditions before the crisis. conditions have terms and lending conditions have tightened up to some extent for understandable reasons given what happened during the crisis and given the losses that banks took. it's also a situation where the economy has been weak and where the value of collateral, the value of stores or factories, et cetera, has come down. which makes it more difficult to borrow as well. so there's some fundamental reasons why credit is harder to come by. that being said, i think there is a tendency to overreact. there's a tendency in a, after a crisis or in a weak period to
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tighten too much. to swing too far. the pendulum can swing too far. >> do you think that's been done? >> i think in some cases, that's been the case. as i've said, the federal reserve, we understand -- we have a responsibility to keep banks safe and sound the best we can. on the other hand, we also have considerable interest in having the economy grow. and so we have been -- and i'd be happy to give you much more detail at a more convenient time and send you a letter or meet with you personally, however you'd like to do it. but we've taken a lot of actions to try to create a better balance for banks, to make sure that they can make good loans. that they are following safe and sound procedures, we will not criticize them for making a loan to a small business or even a business where the collateral value has declined. so we are very sympathetic to what you are saying. we have been working hard.
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i do think there's some progress and improvement. as the economy expands and credit needs go up, we are going to see more lending take place. we are very much aware of this issue and we are reaching out to small businesses, we are reaching out to banks, and if you have any suggestions or you have anyone would like, we have an someone that will be happy to take any complaints or concerns. we do want to be responsive on this issue. >> i'll do that. i'll bring specifics if i may, and maybe you can help. >> of course. >> senator merkley. >> thank you, mr. chair. i appreciated the reference to the small business lending fund. which was a proposal that i developed in response to a problem that we saw in community banks in oregon, they were noting because of the fdic requirement on leverage being firmly applied that helped the community banks were unable to lend. we don't yet know the results of the program. but it was one way to try to get
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funds into main street banks to assist main street businesses. and we have in addition to banks that didn't have the capitalization to make additional loans, we have banks that are not only healthy, but do have funds that are sitting on them to wait and see what happens with the economy. and so we look forward to continue to brainstorm with ways that we can get liquidity in the hands of small businesses. if they can't borrow money, they can't seize business opportunities. they are a job machine that we have to put fully to work in finding the right way to do that. that's important. i wanted to turn back to housing. oregon produces a lot of lumber. and many other states produce lots of products are aren't being consumed when the housing market is done. there are a series of ideas that are still being talked about again, 50 to $100 billion
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promise had turned into less than $1 billion of spending to assist homeowners. one of those concepts is to do a national short sale program in which families that have passed an economic distress test or filter, if their home is being sold at a far lower value after being foreclosured on or shortly before being foreclosured on, the family itself might have a chance to buy it back using lending that is fully underwritten based on their ability to pay but maybe not the complete traditional score structure. a second approach being talked about is down payment grants to help first time home buyers. of course, we experimented with this program. to help the inventory of foreclosured homes. to have an empty home on the block. you have family that's in that home and help arrest the downward direction of house
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pricing. the third is another examination of bankruptcy reform as a way to kind of adjudicate the issues involved in home ownership where every other contract can be adjudicated by a bankruptcy judge, home ownership, home contract cannot be. and when appropriate protocols that we've been alerted to in terms of being backward looking, not forward looking, it's great concern to the banking community. so as we look at this national housing challenge which i think you echoed the concern that it's a major factor in our economy getting back on track. if these are not the right ideas, what are the right ideas? what more can we do here in congress to take on one the really big domestic issues affecting the quality of life for our families and the strength of our economy? >> well, i'm afraid there are no
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simple solutions as you might imagine. the ones that you mention are all interesting ones. let me just offer in general that we'd be happy to work -- the staff would be happy to work with you on the details of any of these ideas. if you'd like to take us up on that, we'd be happy to work with you. the short sale idea have been around, likely to the idea of having a principal reduction in the mortgage, which is something that the federal reserve actually advocated for a number of years which i've talked about in speeches for some time which is a way of creating greater incentives for the home owner to want to stay in the home. that is a program that is now currently in place. building on the program that was passed a couple of years ago. i don't know how far along that has gotten. but that's one approach. >> not very far. >> not very far. >> there is an important -- i'll
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just interject here on this. the challenge on the principal reduction is that as long as the family looks anywhere near a viable, financial institutions are very reluctant to write down the principal. the point that the bank or the mortgage holder that has concluded that the family is going to go under, and the home is going to be have to be resold, at that point, there's no longer kind of this competition between writing down the existing loan on the books. because the house is going to be foreclosured on, it's going to be gone anyway. that's why the conversation had migrated in that direction. >> again, economist at the board and around the federal reserve system has been working on various plans, schemes, to try to address this problem. and i'd be more than happy to work with you in more detail on these issues. but that's -- getting the principals down through mechanism is obviously one approach. on the down payment assistance,
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i think you want to design it in a way so that one the concerns that we had about the homeowners, the tax credit was that it created the temporary bump but didn't seem to have a permanent impact on the housing sector. you want to do something that didn't just shift purchases in time but created a more sustainable demand for housing. that's another fiscal problem. but, you know, i've been -- i'm a member of the -- the committee that oversees the t.a.r.p.. and so we have been getting regular presentations on the treasury on the various programs and to their credit, you know, they've gone beyond their initial hamp program to look at the number of approaches, giving states money to use -- to apply to their own strategies. so there's a lot of ideas out there, and a lot of things that are being experimented with.
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clearly, particularly in a world where unemployment is 10%, and long term unemployment is 44% of that unemployment, there's situations where it's very difficult to find a solution. >> my time has expired. but can i follow up on one piece of this? >> if it's brief. because we've made a commitment here that the chairman would get out of here by noon. we're a little past that now. >> the concept of a permanent down payment grant at a lower level first time home buyers addresses that issue that you were talking about of just shifting to man four. but also something more fundamental which is reducing the cost of homes for families as the home interest mortgage reduction. that kicks in primarily when you buy a larger house and you are in a higher tax bracket. so the vast book of the subsidy goes to the families who needed to lease in terms of becoming homeowners. the idea of a down payment grant, yet it should be in
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addition to, i'm not taking anything away from the concept of interest deduction on your home. the idea is that now you have a family of -- a working family of modest means is buying a very modest house. we are helping them become homeowners in which they would hardly benefit at all from the mortgage deduction. it serves as a fairness factor because we should help working families buy homes as well as help successful families buy large homes. and yet also help observe obser- absorb the inventory of larger homes. that's the broader or fuller picture. >> the commission that the chairman was on talked a lot about the interest reduction and lots of, i think, interesting ways to think about whether that can be made more productive, more constructive. >> i'm not addressing the -- >> no, no, i understand. but it raises the point that
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some people that doesn't really help very much if you don't itemize, for example, you don't get the interest reduction. thank you. >> thanks, senator. let me -- one final question that we've been asked and that is with the substantial expansion of the balance sheet by the federal reserve to make sure the flow of credit continued during the downturn, can you anticipate now what percentage of that expansion would be realized as losses? i've been told it's very small. can you give us some sense of that? >> well, so first as i mention in my testimony, this is not deficit spending. we are buying assets which we will either sell back to the market or allow to run off. currently, this -- we're in a profit position. our cost of funds is very low that the interest that we are receiving we are emitting back
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to the treasury. i got a new number this morning for 2009 and 2010, we remitted back to the treasury $125 billion from this program. which is much higher than our normal. should it be the case that short term interest rates rise, which, of course, would happen if the economy recovers and we need to normalize monetary policy, those remittances could go down. currently we are in a, you know, this is a -- at this point is a profitable program from the perspective of the federal deficit. >> and is it your -- is it your forecast at this point that you will then not experience losses on this extension of credit that was made during the downturn? >> it's -- it's a practical matter. what matters is not losses. because those are paper losses. what matters is the amount of funds, remittances we send back
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to the treasury. under most scenarios, because our cost of funding is so low, we will continue to remit back to the treasury significant amounts of money. under a scenario in which short-term interest rates rise significantly, it's possible there would be a period that we don't remit anything to the treasury for a couple of years. that would be the worse-case scenario. but we would have the early payments which are above normal and the extent that this is a successful policy, it will strengthen the economy and increase tax revenues. i think from a purely fiscal point of view, i think this is most likely to be beneficial, not harmful to the governments financial position. >> yeah, the reason that i ask the question, and phrased it like i did is because in common par lents, there's going to be a great part of what the reserve did that would result in losses
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for the taxpayer. that was the potential for that. and you don't see that? >> i don't see that as likely. our records so far, not only in the program, but in all of the lending and other special credit programs that we've done has been, you know, in very positive from a perspective of returns to the treasury. >> with regard to quantitative easing on the federal purchases, that money is -- that you pay back is money that came from the treasury, is that right? it's the interest? >> well, yes, but it's, of course, it's -- another way of looking at it is the interest that the treasury didn't have to pay to the chinese. >> i'm aware of that. but it's a zero-sum game, i guess, in that sense. you believe it's helpful to the economy. i understand that. >> that's the main point. >> that's the main point of it. on "60 minutes" a couple of years ago, you made reference to
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this is equivalent of printing money. was that when the fed buys -- is quantitative easing, the purchase of friendly bills is that what you said when you said friendly money? >> i was actually talking about a somewhat different issue at that point. let me try to explain what really happens. what happens is when we buy securities, the money finds it's way into the banking system and shows us as reserves that banks hold with the fed. currently banks are holding a large amount of reserves with the fed which will have to some point be unwound as we exit through the program. however, there are some folks that think we are literally printing money in circulation. that's not happening. >> but it does have a tendency, does it not, to increase the circulation of dollars which like more apples in the marketplace makes the apple less
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valuable. >> very -- >> or not? >> the amount of currency and money in circulation has not really been affected by the program. very slightly. in fact, money growth over the last year or two or two years has been below normal. it's not a situation where the fed is dumping money into the economy. that's not what's happening. >> thank you. >> thank you. thank you very much for your appearance. thank you for your forthright testimony here and we look forward to having you up for a meeting with the members as we try to craft a fiscal policy to get us back on track. >> i look forward to it. thank you, sir. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]


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